Andrew Penson, Steven Roth and Marc Holliday check into the Crowne Plaza Hotel. It’s not the setup to a joke, but the latest power struggle over a prime piece of Manhattan real estate.
Penson, the billionaire who once owned Grand Central Terminal, is asking a judge to undo SL Green Realty’s $121 million purchase in September of a sliver of land under the 46-story Times Square hotel.
The hotel itself is owned by Roth’s Vornado Realty Trust, which had first dibs on buying the piece of land underneath the Crowne Plaza if it ever came up for sale. But Vornado, which had fallen behind on its mortgage after the hotel shut its doors for the pandemic, failed to do so.
Earlier this year, Penson’s Argent Ventures bought the distressed mortgage on the hotel and cleared out Vornado’s directors, putting its own manager in place.
Penson filed suit last month in Manhattan to reverse the sale to SL Green so his firm can tighten its grip on the shuttered 795-room hotel and “accelerat[e] the ability to reopen the Crowne Plaza Hotel.”
Read more
At the heart of the struggle is a complex ownership structure governing the Crowne Plaza, at 1601 Broadway between West 48th and West 49th streets.
Vornado owns about three-quarters of the ground underneath the tower, or about 30,000 square feet. The balance of about 11,000 square feet had been owned by the Walber family, which leased it to Vornado as operator of the hotel.
The lease gave Vornado a right of first refusal on the 11,000-square-foot plot if the Walbers decided to sell. That opportunity came this summer.
The Crowne Plaza closed in March 2020 and Vornado stopped paying its rent to the Walbers. By June of last year, the REIT had defaulted on some $330 million worth of Deutsche Bank mortgages against the property.
Argent Ventures swooped in and bought the bad loans at a huge discount, which put Penson in position to foreclose on Vornado’s ownership in the hotel through a UCC action and takeover. But instead of doing that, Penson used a provision in the loan agreements to clear out the board of directors of the Vornado entity that leased the property from the Walbers.
This August, SL Green offered to buy the Walbers’ 11,000 square feet, triggering the right of first refusal. Jumping at the chance to consolidate its ownership at the property, Penson’s manager sent the Walbers a signed contract and wired a $30 million deposit into an escrow account.
But the Walbers refused to countersign the contract, saying it wasn’t clear that the Penson-appointed manager had the authority to exercise the agreement.
SL Green saw Penson’s action as an attempt to “run roughshod” over the UCC foreclosure process and gain control of the building without paying about $18 million in back rent and taxes plus obligations to hotel employees.
The dispute, SL Green said in court papers, is about Penson’s attempt “to obtain something that Argent desperately wanted but could not otherwise obtain: fee interest ownership in the Premises without having to properly foreclose.”
Once the window for Vornado’s option closed, the Walber family executed the $121 million sale of its land under the hotel to SL Green.
Penson is now asking a judge to rescind the deal with SL Green and order the Walbers to sell their property to Roth’s company.
Spokespersons for SL Green and Vornado declined to comment. Representatives for Argent and the Walbers did not respond to requests for comment.
This isn’t the first time Penson has gone to the mat with SL Green.
In 2015, Penson filed a $1.1 billion lawsuit against the firm and the city, claiming Mayor Bill de Blasio’s administration deprived him of the value of his Grand Central air rights when it approved the development of SL Green’s One Vanderbilt office tower next door.
By the following year, though, new investors had come into the group that owned Grand Central and dropped the lawsuit.