Owner of M Social Hotel in Times Square Wins Legal Battle Against Former Operator

Owner of M Social Hotel in Times Square Wins Legal Battle Against Former Operator

By: Benyamin Davidsons

The M Social hotel in Times Square won a legal battle against the former hotel operator.

As reported by Crain’s NY, last Tuesday Millennium & Copthorne Hotels scored a legal victory when an appeals court overturned a state Supreme Court ruling which had thrown out their breach of contract case against Accor Hotels, the former hotel operator.  In 2019, Millennium & Copthorne Hotels had accused Accor of default, or breaching the hotel management contract through negligent accounting practices, misuse of hotel funds, unsupported payments and expenses, charging excessive fees and alleged failure to remediate conditions.

The two companies had settled outside of court, with Accor paying $3.2 million in damages, and the cessation of the management agreement.  After that, however, Accor had taken Millennium to court maintaining that they didn’t actually breach the contract and asking the court to have the company return the $3.2 million it paid for damages.  By the end of 2019, Millennium had filed a countersuit.

The state Supreme Court in Manhattan had dismissed Millennium’s counter case, ruling that Accor was protected by a safe harbor provision in the contract, which prevented Millennium from ending their agreement if Accor disputed the default within a certain time period. Millennium had appealed the decision, and now the appellate court ruled in the company’s favor on the grounds that Accor did not dispute the defaults on time.

The hotel at the center of the debate is at 226 W. 52nd Street in Times Square.  The 34-story, 480-key hotel was constructed by Accor in 1984, and the company owned the hotel until 2012.  The hotel was then purchased by a partnership affiliated with Apollo Global Management and the Chartres Lodging Group, as per property records.  As per Crain’s, the hotel was purchased again in 2014—this time to the company belonging to Singaporean billionaire Kwek Leng Beng. Millennium & Copthorne Hotels (M&C), and its parent company Hong Leong Group, purchased the hotel in 2014 in a $266 million cash deal.  Mr. Beng is chairman of the global hospitality group which owns over 125 hotels spanning across 22 countries.   Accor, which owns the Novotel brand, continued to serve as the hotel operator after the sale.  The hotel was closed in March 2020 due to the COVID-19 pandemic, with Accor permanently laying off all 225 of Novotel’s employees.  The hotel was reopened again in June 2021 under the name M Social Hotel, with the owner also handling the hotel operations.

“Shortly after acquiring the Hotel, M&C was disappointed by its underperformance and, upon investigation, found that Accor was failing to lift the asset through its branding and group services for which M&C was paying substantial fees,” M&C alleged in court papers filed.  “As a result of these continued deficiencies, M&C served a Notice of Default pursuant to the terms of the HMA on April 29, 2019, identifying nine defaults and demanding reimbursement of $3.2 million related to the identified breaches.”

A representative for Accor did not respond to Crain’s request for comment.