Madison 92nd Street files bankruptcy ahead of hotel foreclosure sale

By Caroline Salls

Pittsburgh, Aug. 17 - Madison 92nd Street Associates, LLC filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the Southern District of New York and faces a foreclosure sale of its Upper Eastside Courtyard by Marriott hotel on Aug. 24.

According to a statement filed with the court by Louis Taic and Jeffrey Kosow, the managers of Madison 92nd Street's co-managers, the hotel has been managed by Marriott International, Inc. subsidiary Courtyard Management Corp. since it opened in 2006 under a management agreement "that has proven to be a terrible burden on the hotel's profitability in recent years and has undermined the hotel's overall value."

Although the company filed a formal lawsuit against Courtyard in 2009 alleging breach of contract, fraud and misrepresentation and breach of fiduciary duty, Taic and Kosow said Courtyard still manages the hotel on a day-to-day basis.

"As a direct byproduct of years of mismanagement," Taic and Kosow said Madison 92nd Street became delinquent on mortgage obligations owed to General Electric Capital Corp.

The managers said GE has scheduled a foreclosure sale "following entry of a controversial consent judgment that was executed at the urging of a group of dissident members led by Robert Gladstone," who leads a minority faction of the company's equity holders.

Taic and Kosow said the bankruptcy filing will allow the company to preserve going concern value and protect the hotel against forfeiture via a foreclosure sale, to try to refinance the GE mortgage debt while challenging default interest and multi-million dollar pre-payment penalty claims and to seek rejection of the Courtyard management agreement.

Madison 92nd Street listed $84.47 million in assets and $75.4 million of debt in court documents.

The company does not have any unsecured creditor with claims of $1 million or more.

The company is represented by Goldberg Weprin Finkel Goldstein LLP.

Madison 92nd Street is a New York-based hotel owner. The Chapter 11 case number is 11-13917.

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