Tillary Hotel owner not cooperating with sale closure, lender says

By Sarah Lizee

Olympia, Wash., Nov. 1 – 85 Flatbush RHO Mezz LLC, the owner of the Tillary Hotel in Brooklyn, isn’t cooperating in the process to close the sale of its property to lender TH Holdco LLC, the lender said in court documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

TH Holdco, the credit bid purchaser for the property, also said the company hasn’t been filing its monthly operating reports on time, which appears to be an attempt to hide the real-time performance of the property from TH Holdco as mortgage lender and other creditors.

The lender said that while counsel for the debtor said they are proceeding with the closing of the credit bid, to date, actual cooperation has been “very limited.”

“This, unfortunately, is a pattern TH Holdco has seen before where debtors’ counsel promises to cooperate but then fails to do actually substantively cooperate despite follow up from TH Holdco,” the lender said.

As previously reported, TH Holdco’s Chapter 11 plan for the debtor was confirmed in June.

The plan is premised on a sale of the property. It permitted TH Holdco to credit bid, and to the extent it is the successful purchaser, a commitment by the lender to fund the sum of $200,000 for pro rata distribution to the debtors’ unsecured creditors.

The debtor sought to disqualify the lender from credit bidding, however.

“Permitting TH Holdco to proceed with their $90,000,000 credit bid for the property as contemplated by their proposed plan filed in the debtors’ cases – a sale process that was intended to benefit all parties in interest – will instead reward TH Holdco for evading that very same process while limiting creditor and equity recoveries, resulting in TH Holdco obtaining the title to the property to the detriment of the debtors’ unsecured creditors and equity holders,” the company had said in its motion seeking the disqualification.

The court denied the motion for disqualification and allowed TH Holdco to credit bid the property.

The owner of the boutique hotel in Brooklyn, N.Y., filed bankruptcy on Dec. 18, 2020 under Chapter 11 case number 20-23280.

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