Just two months ago a federal bankruptcy judge stripped control of the Williamsburg Hotel from Toby Moskovits and Michael Lichtenstein, saying they could not be trusted with its finances.
Now the trustee in the bankruptcy seeks to appoint brokers Eastdil Secured and A&G Real Estate Partners as brokers to sell the property.
The two will co-broker the sale with a 1.25 percent fee of the first $103.4 million of gross sales price. They will get an additional 3 percent of any amount above $103.4 million. If the property’s lender, Benefit Street Partners, wins the auction through a credit bid of $96 million or less, the brokers will only receive 50 percent of their fee.
Lichtenstein and Moskovits have not yet objected to the motion to appoint the brokers.
But they are contesting another proposal. The trustee, Stephen Gray, aims to throw out two management agreements between Moskovits’s hotel management company and Liechtenstein.
Gray said there is no need for the agreements now that it is in charge of the property. He is asking a judge to reject the management agreements retroactively to the date he was appointed trustee.
“The management agreements provide no benefit to the debtor’s estate,” his filing said.
The management agreements were a key part of the bankruptcy proceedings. An independent examiner commissioned by the court said the funds were intertwined between the debtor and the hotel’s management company, both of which were controlled by Moskovits and Lichtenstein.
“The principals controlled both sides of the accounting ledger, preventing open disclosure of financial and accounting transactions, and allowing for the siphoning of funds (from the debtor and through the manager) to unrelated investments of the principals and possibly other transferees,” the report stated.
Moskovits and Lichtensten still technically own the hotel despite having no control of its operations. The developers recently filed an opposition to the trustee’s rejection of the management agreement, arguing that some vendors might not get paid.
“The rejection of the management agreements without notice to the numerous counter parties to contracts with the manager creates uncertainty as to who is responsible for payment and when vendors can expect payment,” their objection reads.
Another issue is the Williamsburg Hotel trademark. Lichtenstein and Moskovits’s lawyer claims the trademark along with the hotel’s slogan “Sleep With a Local” are owned by Moskovits. Once the trustee rejects the management agreements, the trademarks cannot be used, according to Moskovits and Lichtenstein.
But the trustee essentially calls the claims nonsense. He also alleges that Lichtenstein and Moskovits recently interfered with the hotel’s operations, including the online reservation system.
The trustee says the hotel is performing well under his control, producing more than $1 million of net operating income in the first month.
Moskovits and Lichtenstein’s Heritage Equity Partners was a key developer in Williamsburg and Bushwick as the area transformed from an artist haven to yuppie playground. But Heritage ran into trouble with creditors prior to the pandemic. It was forced to put some of its properties into bankruptcy to stop foreclosures from lenders.
A Westchester County bankruptcy judge appointed the Chapter 11 trustee while warning Lichtenstein not to dig himself into a deeper hole.
“Mr. Lichtenstein did not make a good impression,” the judge said at the time. “He comes across as a very volatile person who is prepared to take stances that if one would just step back and think about them, don’t make a lot of sense.”
The judge’s ruling appeared to end a legal bloodbath between the developers and Benefit Street, which alleged Moskovits and Lichtenstein had diverted money from the business. Benefit Street sought to foreclose on the hotel, prompting Moskovits and Lichtenstein to put it into bankruptcy last year.