NEW YORK CITY-The owners of the Alex Hotel and Flatotel in Midtown have filed for chapter 11 protection after failing to repay the principal on secured loans for the properties. According to a May 21st filing from the US Bankruptcy Court in Manhattan, 205 East LLC, a New York limited liability company that owns the 33-story, 203-unit luxury Alex Hotel located at 205-209 E. 45th St., has more than $123 million in outstanding loans, and the second debtor, EALC LLC, a Delaware limited liability company that owns the 46-story, 290-unit Flatotel at 135 W. 52nd St. in West Midtown, owes more than $245 million.
Court documents show that Anglo Irish Bank Corp. sold the secured loans and assigned the corresponding rights and obligations to RPAP Hotel Finance LLP, pursuant to two separate loan purchase and sale agreements in July 2010. The loans and corresponding mortgages and notes were then assigned by RPRAP to secured lenders, including the Rockpoint Group LLC, Atlas Capital Group, LLC and the Procaccianti Group, according to the filing.
By August 2010, RPAP commenced a foreclosure action on both the Alex Hotel and Flatotel loans in New York State Court. By January 2012, the court granted RPAP’s motions for summary judgment, awarding Flatotel and Alex Hotel foreclosure, judgment on the notes, judgment on the guaranties, late fees, interest and costs incurred in enforcement of the debts, documents show.
According to the filing, the debtors filed for chapter 11 due to “operating losses from decreased room revenue, significant liquidity constraints, considerable debt burden and unprecedented adverse changes in the economy and hospitality industry.” In addition, the debtors say that the economic downturn has impaired their “ability to meet their debt obligations and certain obligations under the secured loans.”
The debtors explained that the weak economy – specifically, reduced consumer spending, increased unemployment and a severe decline in business travel – caused the demand for hotel accommodations to plummet, according to the filing. In late 2008, supply costs also increased within the hospitality industry, “exacerbating the negative impact of decrease demand within the industry,” the debtors say.
The case is filed under 12-12209 in US Bankruptcy Court, Southern District of New York.
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