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The Williamsburg Hotel, on Wythe and North 10th, is just blocks from the brunch lines at Cafe Mogador and the pedestrian anarchy of Smorgasburg crowds. When it opened in 2017, one of its developers, Toby Moskovits, said it intended to create a hotel “that epitomizes Williamsburg.” She did it. It’s the kind of place with its own influencer stay application form; there’s a rooftop pool, open-concept bathrooms for people who like that sort of thing, and specialized pet services you can add to your stay. And so it’s perhaps fitting that, for the past year, she’s been going through a relatively flashy bankruptcy process.
In court last week, bankruptcy judge Robert Drain stripped Moskovits and his co-owner, Michael Lichtenstein, of their control of the hotel, appointing an independent trustee in their place. It seems like The real deal reported, Drain believed they could not be trusted in the bankruptcy process and might engage in fraud. As if to better frame his feelings, Drain went on to say that Lichtenstein in particular “comes across as a very volatile person” who does things that “don’t make much sense.”
The surprising thing here is that the courtroom at Drain’s White Plains has a reputation for being real estate friendly. debtors. (He oversaw the Sackler family’s Purdue bankruptcy filing last year, approving the company’s reorganization plan and up to $7 million in bonuses for five executives.), including the notorious owner’s case. Raphael Toledano, in which the lender eventually acquired the properties in the East Village of Toledano. Apparently, even Drain has its limits.
The basics of the deal are as follows: Moskovits, who founded Heritage Equity Partners in 2008, and Lichtenstein, the company’s president, began planning the hotel in 2012 as they expanded their presence in Williamsburg. And while a number of hotels went bankrupt during the pandemic, developer issues started before COVID. In 2019, Heritage defaulted on the hotel’s mortgage and Benefit Street Partners, the hotel’s lender, successfully petitioned the New York County Supreme Court to remand the hotel. receivership, essentially giving someone else the power to manage it. But the receiver, who had been appointed by Moskovits, allowed Moskovits to continue to control the hotel’s revenue, according to Benefit Street Partners. In February, a report released by a court-appointed examiner during the bankruptcy proceedings revealed that Moskovits and Lichtenstein had engaged in a “complex scheme to embezzle and siphon off substantial sums” from the hotel. The report also revealed that the hotel did not file taxes from 2017 to 2019 and that $68.2 million deposited into a hotel manager’s account was not reported to tax authorities. The examiner added that Moskovits and Lichtenstein failed to respond to questions during the investigation and intervened in third party subpoenas. In a comment to The real dealLichtenstein said, “The property looks forward to restructuring and repaying all creditors and concluding this bankruptcy process in the near future.”
The owners disputed the examiner’s report in court documents, as reported The Wall Street Journal, stating that it was “full of misinterpretations, misrepresentations and outright defamatory and baseless conclusions”. In a deposition, Lichtenstein also said, “I guess Fortress and Benefit Street are competing to see who the biggest asshole lender in New York is, so I think Benefit Street…could win that one, but we’ll see. (Fortress is another developer lender trying to grab.)
None of this was lost on Drain, who noted in a hearing that “some of these actions ‘taken by the developers’ also “seem to me to rise to the level of fraud”, thus the trustee. The bankruptcy case is ongoing, but things don’t look good for the developers, with Drain focusing on Lichtenstein when he said bluntly, “I’m afraid he’s doing something really stupid here.”