Smooth Transition Promised But BV’s Grill License Uncertain
By Tina Traster
A U.S. Bankruptcy Court judge on Monday approved the $18.5 million sale of the The Time Hotel of Nyack to Juniper Time LLC, a company affiliated with IMH Financial Corporation.
Judge Robert D. Drain in court dismissed objections from two debtors, ZSC Nyack Fund LLC and Nyack Hotel Fund LLC, which argued that the $18.5 million sale was not a fair value for the hotel.
“There is no viable alternative to this sale,” said Drain.
Fred Stevens, the bankruptcy trustee, maintained the hotel was “extensively and appropriately marketed,” and that the “value of the property is Juniper’s bid.”
Kirk L. Brett, an attorney with Duval & Stachenfield LLP representing the objecting debtors, ZSC Nyack Fund LLC and Nyack Hotel Fund LLC, said he did not take issue with the bankruptcy trustee or Cushman & Wakefield, the firm that marketed the property. However, he said “the plain fact is that there’s not enough money being paid for the hotel.” He said $40 million was originally invested, and that an appraisal to the lender valued the hotel at $30 million.
He put forth a proposal on behalf of some members of the original team who attracted new investors CCUR Holdings Inc. and Elevations Insight Partners LLC who were offering $21.5 million. Drain asked if the prospective investors had hotel experience, and was told they did not.
In making his ruling, the judge focused on the urgency of keeping the hotel solvent. He said the hotel’s cash flow would last “only through the end of this week if the sale was not closed.”
The sale is expected to close on March 29th.
A team from Juniper were present in the courthouse but said they had no comment until after the sale closes. IMH is a privately-held Scottsdale, Arizona-based real estate investment and finance company that focuses on investments in commercial, hospitality, industrial and residential real estate and mortgages secured by such assets. At present, the company owns and operates one hotel in Arizona.
Stevens called Juniper a “real industry player” that will maintain the integrity of the hotel and the continuity of jobs. However, nothing in the sale stipulates that Juniper must continue to operate the hotel. An attorney in the court for BV’s Grill, Shawn Fox of McGuireWoods LLP, said “he had no objection to the transfer.”
Juniper has told insiders that “all options are on the table” for the Time Hotel, a 133-room boutique hotel, which includes BV’s Grill.
Juniper Time could choose to run the hotel, hire an operator to run the hotel and restaurant, or sell it. They have said there is a lot of national interest in the property. The Time Hotel, a re-purposed factory building, is Rockland County’s only boutique hotel but it is located off a thruway exit and could be attractive to national brand. Nyack officials had invested a great deal of hope in the hotel and its ability to attract tourism to the village. The hotel has successfully attracted business and tourists but its potential has been undermined by financial mismanagement.
The sale of the hotel stipulates that the entire property belongs to Juniper, and the new owner is free to do what it wants with BV’s Grill. Juniper is not obligated to assume or continue any existing contracts or unexpired leases, according to the court document. Whether Juniper retains BV’s Grill or the hotel’s operator, The Dream Group, remains to be seen. Insiders have said it is unlikely the Dream Group will remain in place though BV’s Grill licensee Joseph Smith is in talks with the hotel’s new owner.
Conceivably the hotel could be sold to a national chain operator or even reconfigured for another use.
Juniper was one of two bidders for the hotel in a Feb. 27th auction. Juniper Time LLC beat out the only other bidder, Hawkeye Hotels, which bid $15 million. Two weeks prior to the auction, Juniper purchased the mortgage debt of $18.5 million from the lender, Bank Hapoalim B.M (BHI). Essentially, they are buying a property for which they’ve already satisfied the debt for most of the secured creditors, but not for a long list of others who are owned money. The hotel group is $45 million in debt, including a $10 million loan partially secured by a mortgage against the hotel, and more than $362,000 in property taxes.
In court documents the trustee states that members of the original investment team, including Howard Dean, John Krupa and Don Wellington, had failed to deliver on a promise to present a reorganization plan “that would have been the best exit strategy for the debtor and the creditors.” Stevens in court documents said “not a single insider submitted a proposal that was accompanied by the required deposit or any financial information whatsoever.”
When no plan or other proposal was forthcoming, the Trustee said he was compelled to “commence a marketing and transaction process.”
The Time Hotel was forced into bankruptcy last July. In August 2018, the bankruptcy trustee Stevens declared the debtor’s mortgage had matured without repayment, vendors were refusing services for nonpayment, including O&R, a $5.9 million judgment lien was secured by a prior management company, and BV Grill, the onsite restaurant, had not paid rent in months, if ever.
In recent years, IMH bought and sold three boutique hotels in Sedona, which they sold to Diamond Rock Hospitality Properties. In 2017, IMH bought MacArthur Place Hotel and Spa in Sonoma, California for $36 million. Lawrence Bain, chairman and CEO of IMH, had said at the time of the purchase, “The historical significance and provenance of MacArthur Place are precisely the attributes we seek when acquiring a boutique property and we look forward to investing our future efforts into building on what [the owner] has created, bringing the hotel to a five-star level experience as we have done in Sedona.” IMH is transforming the hotel with a major renovation set to cost nearly $20 million. Celebrity chef and Food Network star Geoffrey Zakarian has partnered with Sonoma’s historic MacArthur Place Hotel & Spa.
IMH suffered a big blow during the mortgage crisis, but since 2008 has been trying to reinvent itself from a mortgage lender to a hospitality property investor. The company has sustained itself through the sale of the collateral on defaulted loans, sale of investment properties, and new private offerings.
In its third quarter 2018 investment statement (10Q), the company wrote: “The Company intends to continue to expand its hospitality footprint through the acquisition or management of other luxury boutique hotels. We believe that our well-established hospitality management team can replicate the success we achieved at our Sedona hotels through the strategic expansion of our hospitality business model.”
According to that same filing, nearly 75% of the company’s $8 million in operating revenue is generated from its hospitality and entertainment operations. Related expenses exceeded $9 million, while the company showed an operating loss of nearly $3.5 million in that sector.