UPDATED, Feb. 7, 2020: East West Bank is moving to foreclose on the loans secured by the Selina Chelsea NYC property, citing a missed payment last month.
In a complaint filed in state court Monday, the bank said it issued two mortgages totaling $31 million in 2013, but the borrower — a limited liability company associated with Mexican hotel magnate Moises Micha — is in default.
The filing says the debt — now $25.6 million — was technically not due to be fully repaid until December 2020, but the lender invoked its “right to acceleration” because the owner failed to make a payment within 10 days of a payment deadline last month. The bank is asking for the property to be foreclosed and sold.
Selina is a hotel and co-working company that counts WeWork co-founder Adam Neumann among its backers.
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The lengthy complaint, filed in New York County Supreme Court, suggests the bank wants to sever ties as quickly as possible: It lists 18 reasons the loan is in default, including that the owner failed to maintain specified debt coverage ratios and reserve accounts, has not cleared violations and a judgment against it, and entered into a management agreement with Selina without consent from the lender.
The nine-story hotel, 516-518 West 27th Street, formerly known as “Hotel Americano,” was opened in 2011 by Grupo Habita, a Mexican hotel operator with which Micha is associated.
Selina reached an agreement last July with Micha’s ownership entity to manage and operate the hotel. A separate LLC associated with Selina is a defendant in the foreclosure action.
A spokesperson for Selina said the company was unaware of the action, which would be between the lender and the owner.
“Selina is the operator of the property only, and has no connection to the lender,” the spokesperson said. “Selina renovated the property and opened in December — converting it from a distressed asset to a vibrant and viable hotel property.”
Micha was named as the authorized representative for the LLC that owns the hotel in 2013 loan documents. However, the 2019 management agreement with Selina was signed on behalf of the LLC by Jonathan Franklin, who did not respond to requests for comment.
In a statement, Micha told The Real Deal he did not operate the LLC. “I’m the principal and managing partner of Grupo Habita and the group used to manage Hotel Americano until the end of 2017,” he said. “Grupo Habita remains involved solely as a minority investor in the property but all decisions and management of the asset are in the hands of the majority owner and the manager of the LLC.”
Founded in Panama in 2015, Selina specializes in offering accommodation, co-working spaces and leisure opportunities to travelers. Its president, Yoav Gery, told Bloomberg in October that his company was seeking to raise $500 million for investment in U.S. real estate. Gery did not respond to a request for comment.
The land under the hotel was previously owned by the Grieco family, which transferred its interest to the LLC in 2007. It is unclear whether the family retained a stake. Reached by phone, Joseph Grieco, who is named in property records, declined to comment.
Other named defendants include Mexican architect Enrique Norten and developers Ashwin Verma and Sean Ludwick, who were all listed as guarantors. None of the men could be reached for comment.
Ludwick pleaded guilty in 2015 to causing the death of Douglas Elliman broker Paul Hansen, a friend whom he abandoned after crashing his car in a drunken-driving incident in the Hamptons. In October 2017 Ludwick was sentenced to three to nine-years in prison. He was denied parole in 2018 and will appear before the parole board again next month.
Mortgage records dating back to 2007 show Ludwick signed the loan documents for the Chelsea site and Micha later became the authorized signatory.
Other defendants in the foreclosure action — by virtue of their being owed money by the hotel — include the city’s Department of Finance, the state’s Department of Taxation and Finance, Valentis Electric, the Environmental Control Board, New York County Criminal Court, and several individuals, including a Brooklyn resident who won a nearly $1 million judgment against the mortgagor.
Victor Genecin, an attorney with Squire Patton Boggs who is representing the bank, did not respond to multiple requests for comment.
Hotel development has boomed in New York in recent years, putting financial pressure on existing outfits vying for customers in an overstocked marketplace. Just last month, the owner of the Blakely Hotel on West 55th Street told staff he was shutting down his operation because of financial pressures, a move he said was symptomatic of wider problems across the industry.
Editor’s note: This article has been revised to include a statement from Moises Micha saying his company, Grupo Habita, no longer manages the hotel at 516-518 West 27th Street.
Write to Sylvia Varnham O’Regan at so@therealdeal.com