By Brian Bandell, South Florida Business Journal | June 11th, 2020
The new Variety Hotel in Miami Beach is the city’s first hospitality property to face a foreclosure lawsuit amid economic fallout from the Covid-19 pandemic.
BI 44 LLC, an affiliate of Miami-based BridgeInvest, filed the suit June 8 against AC 1700 Alton Owner LLC. It targets the 68-room hotel at 1700 Alton Road, a historic building that was recently renovated. The hotel has yet to open.
The lender granted the $25 million mortgage in March 2019. According to the complaint, the borrower missed interest payments in April 2020 and owes the full $25 million in principal, plus interest.
Miami-Dade County issued an emergency order March 20 that forced the closure of hotels, except for emergency guests, as the Covid-19 pandemic became more widespread. The county lifted its order June 1 and allowed hotels to reopen, but occupancy is still well below typical levels.
Attorney Jeffrey C. Schneider, who represents AC 1700 Alton Owner, said his client was close to obtaining a temporary certificate of occupancy (TCO) and opening the hotel when the emergency order was issued. His client intends to “vigorously defend the lawsuit.”
“It’s terrible. This is not the kind of situation or timing where a good-faith lender would bring a foreclosure action,” Schneider said. “We are dealing with a global pandemic, where virtually everyone on the planet stopped paying for a month or two.”
Attorney Isaac Marcushamer, who represents BridgeInvest, said the borrower was given extra time to work something out because of the pandemic, but they couldn’t come to an agreement. His client had little choice but to foreclose.
“In non-Covid times, if you had a default in April for failure to pay interest, you are probably in foreclosure fairly quickly, not nearly three months later,” Marcushamer said. “We remain open to reasonable negotiated resolutions, but if we can’t get there, we will have to protect our rights we have under our [loan] documents.”
AC 1700 Alton Owner acquired the five-story building on a 15,000-square-foot lot for $21 million in 2015. At the time, it was an apartment building that was originally constructed in 1922. AC 1700 Alton Owner started renovating it into the Variety Hotel in 2017, including the addition of a pool.