Griffon Gansevoort files bankruptcy, eyes sale of New York property

By Sarah Lizee

Olympia, Wash., Nov. 7 – Griffon Gansevoort Holdings LLC filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the Southern District of New York to implement a pre-packaged Chapter 11 plan of reorganization.

The debtor owns the real property at 55 Gansevoort St. in New York. The property is a commercial building subject to a triple net lease with Restoration Hardware, Inc.

Based on a contract of sale with Restoration Hardware, the debtor estimates that the property value is $57.71 million.

The property is encumbered by a first-mortgage lien held by Mishmeret Trust Co. Ltd. as trustee for series B debentures issued by Delshah Capital Ltd. through a deed of trust dated Jan. 5, 2016. As of the petition date, the mortgagee’s claim is about $58.69 million. New York City lien claims total about $212,146.

The debtor maintains funds of about $7.39 million in brokerage accounts at UBS Bank as collateral for a line of credit UBS issued to DelShah Capital Acquisition LLC, a debtor affiliate, on which $7.09 million is due. Griffon is not a borrower under the line of credit, but a guarantor.

In addition to the mortgagee’s claim, the debtor is aware of general unsecured claims of about $180,955.

Griffon has a signed contract to sell the property to Restoration Hardware for $57.71 million.

The contract provides for a Dec. 1 target closing date and a Dec. 21 outside closing date.

If the sale does not close by the outside closing date, the debtor will market the property through Meridian Capital Group LLC via court-approved bid procedures.

Griffon’s obligation to the mortgagee arises from the debtor’s guarantee of an obligation of Delshah Capital Ltd., the parent company.

The debtor’s liability under the guarantee was triggered by Delshah Capital’s default under a deed of trust dated Jan. 5, 2016 between Delshah Capital and the mortgagee, with respect to certain bonds issued by Delshah Capital.

Absent a consensual resolution, the mortgagee has the right to foreclose and or obtain control of Delshah Capital to ensure that the bondholders receive the net proceeds from any sale of the property.

In that case, the debtor would likely lose control of the property and the pending sale could be jeopardized, Griffon said.

As part of its overall agreement with the debtor and Delshah Capital, the mortgagee agreed to defer taking action to the extent Griffon would make the Chapter 11 filing, obtain approval of the sale, and turn over the net proceeds of the sale to the trustee after payment of all claims against the debtor under a Chapter 11 plan.

Griffon said that by selling the property through the bankruptcy case, the debtor has ensured payment to general unsecured creditors despite the fact that they are subordinate to the mortgagee.

In the meantime, the debtor intends to preserve and protect the property by operating in the ordinary course of business.

Since the lease is triple net, including payment of insurance and taxes, the debtor anticipates no use of cash collateral pending the sale.

The company listed up to 49 creditors, $50 million to $100 million in assets and $50 million to $100 million in liabilities.

No creditors were listed with unsecured claims of $1 million or more.

Backenroth Frankel & Krinsky, LLP is representing the company.

The New York-based real estate company’s Chapter 11 case number is 23-11771.

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