By:  Serach Nissim

Margaritaville Resort Times Square has filed for Chapter 11 bankruptcy protection to prevent a foreclosure auction that was scheduled for Monday.

As reported by Crain’s NY, the troubled hotel, owned by Soho Properties, filed the petition on Sunday in federal bankruptcy court for the Southern District of New York. Previously, on June 28, Soho had filed a lawsuit in Manhattan Supreme Court to stop the foreclosure auction, but in that case a judge had ruled against the filing and the bankruptcy had proceeded, as per court documents.  The new filing, by executive vice president Sethian Pomerantz, requests bankruptcy protection for the owner of a limited liability company that holds the complete membership interest in the Margaritaville hotel.  Soon, the hotel itself will likely also file for bankruptcy protection, as indicated by the filing.

The Auction, which had been set for July 10, would have been for a $57 million loan on the property from the Arden Group, a real estate firm based in Philadelphia. This loan has accrued millions ofdollars worth of interest, with the exact amount outstanding being disputed, per the filing.  The hotel has been facing bankruptcy woes since at least May.  Per Crain’s, in Soho Properties’ June lawsuit against the Arden Group, the owner had claimed that the slated auction was designed to discourage a fair bidding process. Soho also alleged that Arden wants to take over the hotel and that’s the reason it refused to postpone the auction when Soho was close to obtaining new financing.

The hotel was opened in 2021, which was a very difficult year even for established hotels.  Now, however, revenues are improving and are slated to reach $25 million by the end of 2024, based on expectations that more of the vacant retail spaces will be leased out by then, the filing states.  “Given the projections for future income, the appraised value of the hotel and the solid location in Times Square, where tourism is reviving, the Debtor believes that a refinancing of the hotel can ultimately be achieved within a reasonable period of time,” reads the filing.  Soho Properties is hoping to negotiate a refinancing of its existing mortgage and debt with its creditors.  Margaritaville Resort Times Square has between one and 49 creditors, for assets and liabilities estimated at between $100 million to $500 million, per the filing.

The island-inspired resort is centrally located at 560 Seventh Ave on 40th street, near Bryant park and Madame Tussauds wax museum.  It boasts 234 guest rooms and suites, five original restaurant and bar concepts, a terrace, a fitness center and a year-round heated pool.  The 4-star hotel offers room service, concierge service and private parking.  The property also includesroughly 34,000 square feet of retail space.  The hotel is appraised for a value between $266 million and $350 million, as per a May appraisal quoted in the bankruptcy filing.

Soho Properties was founded by Sharif El-Gamal, who purchased the site for $62 million in 2014.  He said he spent $400 million to develop the Jimmy Buffett-themed hotel, per Crain’s.

The bankruptcy filing “will not impact resort operations,” and the hotel will remain open and keep its current staff, said Margaritaville Chief Investment Officer Evan Laskin.  Arden Group and Soho Properties declined to comment on the bankruptcy filing.