The W New York Union Square hotel was put into bankruptcy by the junior mezzanine lender that took over ownership of the Manhattan luxury property in December from Dubai World.
Hotels Union Square Mezz 1, an entity controlled by junior lender LEM that owns the hotel, filed for bankruptcy yesterday in Delaware, saying it owes creditors as much as $100m. The Chapter 11 reorganization stops a foreclosure auction that was scheduled for today by the senior mezzanine lender, DekaBank Deutsche Girozentrale.
LEM, an affiliate of Lubert-Adler Real Estate Funds, paid $2m at a foreclosure auction on 8 Dec to assume the debt on two mezzanine notes as well as the mortgage payments on the hotel after Dubai World defaulted. A month later, DekaBank announced its intention to foreclose on the hotel unless loan payments were brought up to date.