(Bloomberg) -- A lender run by the billionaire Reuben Brothers has filed to seize the Chatwal, a luxury hotel in Midtown Manhattan, after the debt went into default.
The property’s mezzanine debt, which was loaned by the Reuben Brothers’ Motcomb Estates, is scheduled for a Jan. 17 auction, positioning the winning bidder to take control of the 76-room hotel at 130 W 44th St., where weekend rates often top $1,000 a night.
The hotel is part of Hyatt Hotels Corp.’s global system, and is linked to an entity called Adams Hotels International in property records. A pre-foreclosure lawsuit filed in May lists Dubai businessman Iyer Vaidyanathan Narayan as a guarantor on the loan.
A representative for Narayan didn’t immediately respond to a request seeking comment.
A representative for Hyatt said that the property is expected to be put up for auction in January. The hotel will continue normal operations throughout a potential change in ownership, with service levels remaining intact, the representative said.
The Chatwal is not the only New York hotel to grapple with lenders in recent years, as sluggish international tourism and business travel weighed on demand, and higher interest rates ramped up financial pressures. The Times Square Edition and the Margaritaville Resort Times Square Hotel have had similar issues, even as lodging demand has improved significantly from the early days of the pandemic.
Public auction sales under the uniform commercial code position the winning bidder to take control of property through a non-judicial foreclosure process. The lender typically is the sole and winning bidder, unless a borrower is able to resolve the troubled debt before an auction. Mannion Auctions is conducting the sale.
Mezzanine or junior loans typically have high interest rates, in exchange for the lender taking on the risk of a high loan to value. The Chatwal’s mezzanine debt balance is expected to climb to $79 million by the auction date from $62.5 million as of Nov. 21, according to presentations seen by Bloomberg from brokerage Newmark Group Inc., which is marketing the sale.
British billionaire brothers David and Simon Reuben, with a combined worth roughly $14 billion, according to the Bloomberg Billionaires Index. They originally made their fortune as commodity traders and have built a global real estate empire of hotel, office and retail properties.
They’ve also become major lenders, positioning themselves to take over projects that run into financial trouble, such as a $2.5 billion hotel, retail, and residential complex in Los Angeles. A spokesman for the Reuben Brothers declined to comment.
--With assistance from Ben Stupples and Gillian Tan.
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