Facing Foreclosure, the Standard High Line Hotel Is Suing Its Lenders

(Bloomberg) -- The owner of the Standard High Line Hotel in New York is countersuing its lenders, including Apollo Global Management Inc., in a bid to stop a foreclosure on the property. 

Wells Fargo & Co. sued on behalf of lenders in November to foreclose on the hotel, contending the owners defaulted on a $170 million mortgage.

The 338-room hotel, which straddles the High Line on Manhattan’s west side, was acquired in 2017 for $340 million by Hong Kong-based Gaw Capital Partners. The firm fell behind on mortgage payments last year amid the Covid-19 pandemic.

Gaw’s counterclaim accuses the lenders of an “illicit scheme” to extract a $50 million payment from the firm. It says proposals to negotiate loan modifications were dragged out and thwarted by Apollo and its partner Triangle Capital Group, which own 18% of the debt including a slice that could gain control of the property in a default. 

“Apollo and Triangle knew that borrower could not, and would not, accept the outrageous new terms, but offered the terms to ensure that a resolution would never be reached, in an effort to extort millions from Borrower and ultimately the forced taking of the hotel,” the counter claim says.

Gaw is demanding unspecified damages and reimbursement for its costs. It also says Wells, Apollo and other lenders should be denied interest on delinquent debt.

New York hotels were hit hard by Covid-19, which forced them to shut down. The industry has bounced back a bit in recent months as Americans started to travel again. Occupancy at the Standard was 30% in December 2020, climbing to 76% in June, according to commentary on the mortgage. The hotel is currently open.

Apollo disputed its role in causing the foreclosure last month after Gaw issued a statement attacking the investment firm. A representative for Apollo said the firm had no additional comment. Triangle didn’t immediately respond to a request for comment.

Gaw Capital Partners had more than $32 billion under management as of mid-2021, according to the company’s website. Even as it fell behind on the New York hotel payments, Gaw has continued to seek new investments and raise money, including $1.2 billion for an Asia Pacific real estate fund, according to a Nov. 17 announcement.

The case is Wells Fargo Bank, NA v GC SHL, 21-cv-08940 U.S. District Court, Southern District of New York (Manhattan).

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