Less than two years after the Margaritaville Resort Times Square hotel opened in Manhattan, the property is facing a foreclosure auction after its developer is said to have defaulted on a loan.
The public sale will be hosted July 10 at the office of law firm Paul Hastings in Manhattan with the hotel located at 560 Seventh Ave. serving as the principal asset being auctioned, according to a notice obtained by CoStar News.
The collateral will be sold as a single lot and will not be divided or sold in any lesser amounts, the notice said.
The auction comes after developer Sharif El-Gamal’s Soho Properties defaulted on a $57 million loan provided by Arden Group, according to an earlier report by The Real Deal.
The hotel is expected to remain open for business, Margaritaville Holdings, the operator of hotels, restaurants and casinos named after musician Jimmy Buffett’s signature song, told CoStar News.
"The current ownership situation will have no guest impact and Margaritaville looks forward to delivering great resort and restaurant experiences in Times Square for a long time to come," the company said in an email.
Refinanced Construction Debt
Arden originated the two-year loan in late 2021 for the 234-room hotel that opened in June that year with the money used to refinance existing construction debt, the company said in a November 2021 statement. The property is located by 40th Street just south of Times Square, the tourist and entertainment hub.
Craig Spencer, Arden chairman and chief executive, said at the time of the financing deal that “Margaritaville Times Square is ideally positioned to capitalize on New York’s economic recovery.”
An Arden spokesperson declined to comment to CoStar News. SoHo Properties, Paul Hastings and Newmark, which is marketing the property, didn’t immediately respond to requests seeking comment.
The so-called UCC foreclosure auction, which is a public sale without a judicial process, comes as higher interest rates have seized up lending and market activity and led to defaults across different property types.
“This is the most active that I’ve seen” when it comes to UCC auctions, auctioneer Matthew Mannion of Mannion Auctions, which will handle the Margaritaville Resort Times Square auction, said in an interview, adding he’s seen an increase in auctions scheduled especially for hotels and Class A commercial office buildings since the start of the year. “A lot of lenders were trying to hold out and weather the storm to see if the market is coming back. … [But] if you have a nonperforming agreement or loan, you can only wait for so long.”
In a telling sign of the challenges facing the market, Mannion told CoStar News he’s handling 12 auctions so far in June, up from just three a year earlier.
At the time of the Margaritaville Resort Times Square opening, El-Gamal, chairman and CEO of Soho Properties, told CoStar he was a “little nervous” about the reopening of New York after the havoc wreaked by COVID-19. He said at the time a clear hopeful sign was a retail tenant agreeing to pay “an arm and a leg” for a 5,000-square-foot retail space on the ground floor of the hotel. That space as of Sunday still looked to be vacant.
The 32-story, $370 million hotel development features what it bills as the only year-round outdoor heated pool in Times Square, a 32-foot replica of the Statue of Liberty holding a margarita, and views of the iconic ball used in New Year’s Eve celebrations as well as the Manhattan skyline. It was a foray into the Northeast by the brand known for its island-inspired theme.