7-25-2024 -More trouble for Michael Shah in Meatpacking District
Developer failed to repay $28M loan after being stiffed by tenants
A foreclosure lawsuit filed by Wells Fargo accuses Shah of failing to repay a $28 million mortgage against the two commercial properties, where Shah has struggled to collect rent from key tenants. Wells Fargo, as a trustee, filed the suit in federal court on behalf of the commercial mortgage trust that held Shah’s loan.
According to the July 18 complaint, in 2017 Shah took out the mortgage on 58-60 Ninth Avenue and 69 Gansevoort Street, consolidating a preexisting $20.5 million debt with an additional $7.5 million loan.
The new loan matured in August 2022, but Shah failed to repay it in full, the lawsuit alleges. Wells is seeking repayment with interest.
“We’re still in regular communication with the lender working toward a resolution,” Shah told The Real Deal. He added he expects to market the properties in the future.
One of Shah’s attorneys, William Savino, said that negotiations are ongoing and he does not expect the action to result in a foreclosure. (Because of a conflict of interest, Savino himself is not involved in the negotiations.) Lawyers for Wells Fargo declined to comment.
Shah’s property at 58-60 Ninth Avenue has been embroiled in litigation for much of the past year.
In May, commercial real estate agency Avison Young alleged that Shah paid less than half of the $220,000 he owed the firm for brokering commercial leases at 58-60 Ninth Avenue.
But Savino, Shah’s lawyer, said the tenants in those deals, Chelsea Winery and Chelsea Market Events, were “doomed to fail,” and Avison Young knew that the businesses were “financially incapable of satisfying this lease.”
In a response submitted to court last week, Shah claimed that by failing to disclose the unsuitability of these tenants, Avison Young “breached its duties of disclosure and care.” The response demands $1 million in punitive damages for the “fraudulent misrepresentation.”
Shah began eviction proceedings against Chelsea Winery and Chelsea Market Events last year. Scott Loffredo, Shah’s attorney in those cases, said the evictions are now “imminent.”
An attorney for Avison Young declined to comment. An attorney for Chelsea Winery and Chelsea Market Events did not respond to a request for comment.
A previous tenant at 58-90 Ninth Avenue, Urban Outfitters’ brand Free People, stopped paying rent at the start of the pandemic. Shah to terminated the lease in June 2020 and sued the fashion retailer for the missed payments. A federal judge in 2022 found the tenant liable for over $13 million.
The most recent lawsuits come less than a year after Shah wheeled and dealed his way out of a situation in the Israeli bond market. The developer, who was at risk of defaulting on $59 million of loans set to mature last fall, managed to push back the bonds’ due date, creating enough of a window for him to sell his hospitality property at 55 Gansevoort Street for $57.7 million in December.
In that instance, Shah, whose development firm Delshah Capital had closed on the bonds in a $102 million debt offering in 2016, put the ownership entity of 55 Gansevoort Street and 100 Christopher Street into bankruptcy. Shah called it a prepackaged bankruptcy done with the consent of the mortgage holders and bondholders’ trustee.
This article has been updated with more information about past tenants at 58-60 Ninth Avenue and the 2016 bankruptcy filing for the Gansevoort Street and Christopher Street properties.
