NEW YORK CITY-The bankruptcy cases related to the W NewYork—Union Square have been settled, with LEM Mezzanine agreeing tosell the hotel property to a new venture in which its former owneris a minority member. Terms of the deal were not disclosed; anaffiliate of LEM had bought the W this past fall in a foreclosureauction for $2 million and the assumption of $212 million indebt.


Led by Host Hotels & Resorts LP, the new venture will buythe 285-key hotel, the first mezzanine loan in favor of seniorlender DekaBank Deutsche Girozentrale will be repaid and LEM willreceive current and future payments on its original mezz loan.Istithmar World Capital, the Dubai World unit that bought the20-story property in 2006 for $285 million but later defaulted onloans, is a minority member of the Host-led venture.


Meanwhile, W Hotel Management, an affiliate of Starwood Hotels& Resorts Worldwide, will continue to manage the hotel underits existing management agreement. In a joint statement, theparties to the settlement say the Union Square hostelry “ispositioned to continue its role as a leading hotel in the New YorkCity luxury hotel market.”


This past March, Hotels Union Square Mezz 1 LLC and Hotels UnionSquare Mezz 2 LLC filed for Chapter 11 protection in US BankruptcyCourt in Delaware, thus halting a planned foreclosure auction forthe hotel. DekaBank was listed in bankruptcy court documents as theentity’s largest unsecured creditor with a loan of $60 million. Theagreement announced Wednesday afternoon is part of a joint chapter11 plan filed by the two entities to wind up the cases.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.