Allen Street Hotel Facing Foreclosure

For a short while there, it actually seemed as though the Lower East Side skyscraper finally got its act together. Work on the beleaguered Allen Street Hotel project, which first broke ground three years ago at 139 Orchard Street, jumpstarted last November and progressed rather quickly. Within a small timeframe, the eyesore reached its apex of sixteen stories, and even hosted a collection of various national flags. But the enthusiasm quickly faded, and all flags were quickly deposed. Instead, it was to be just another case of hurry up and wait, for a financial shitstorm was waiting in the wings.

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Misrahi Realty had recently put the stalled project on the open market for $39 million in cash ($398,000 per room), but no takers arose. Now the developers are facing foreclosure with the default at the hands of creditors Maverick Real Estate Partners. The Real Deal has more on the woes of the Allen Street Hotel:

Maverick acquired a $5.5 million note from Brooklyn Federal Savings Bank, after DAB, a Valley Stream, N.Y.-based developer, allegedly went into default, according to the complaint filed July 1 in Manhattan Supreme Court.

On March 23, the lender advised DAB that it would no longer extend the loan at the site, at 139 Orchard Street, then sold the debt to Maverick Real Estate, which acquired the note through an entity called Orchard Hotel.

The developers allegedly incurred further default as millions of dollars of mechanics liens were filed against the property by unpaid contractors, and the group insurance policy at the property was canceled.

As of June 17, the developers owed $7.96 million in unpaid loans, interest fees and other charges, according to the complaint.

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The following quote pretty much sums up the whole issue, and how we’ll be stuck with yet another stalled neighborhood hotel.

The property was scheduled for a July 2008 auction, according to PropertyShark.com.