Owner of Cassa NY Hotel & Residences Files For Chapter 11 Bankruptcy Protection

Apr. 07, 2011 5:24 AM ET
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Contributor Since 2010

Randall Reese founded Restructuring Concepts LLC after spending nearly six years with the international law firm of Skadden, Arps, Slate, Meagher & Flom LLP in its Corporate Restructuring practice group. During that time, he represented clients in many large and complex chapter 11 cases, including representing US Airways Group, Inc. (2002), Delphi Corporation, Washington Group International, Inc., and Enron Corporation as debtors and debtors-in-possession. Mr. Reese also represented creditors, investors, acquirers and other interested parties in numerous other cases, including the chapter 11 cases of US Airways, Inc. (2004), ATA Airlines Corp., PG&E National Energy Group, Inc., Solutia, Inc., USGen New England, Inc., Midway Airlines Corp., and Venture Holdings LLC. Prior to joining Skadden, Mr. Reese also worked with a variety of organizations ranging from new ventures to internationally-renowned business think tanks to Fortune 500 companies. Mr. Reese received his B.S.B.A. from Georgetown University, his J.D. from the University of Chicago Law School, and his M.B.A. from the University of California, Berkeley.
Waterscape Resorts LLC, the company which owns and (with "certain affiliates") developed the Cassa NY Hotel & Residences, which is a condominium hotel and residential apartment building located at 66-70 West 45th Street in New York City, filed for chapter 11 protection this week.  Waterscape acquired three contiguous buildings at 66, 68 and 70 West 45th Street in July 2005 for $20 million and began construction of the 45 story Cassa NY building in July 2007.  Construction was completed in September of last year and the hotel and rental business has generated annualized revenues of $17-18 million according to court filings.  By the end of September 2010, Waterscape had also sold five condominium units in the building for a total of slightly less than $13 million, according to court filings.

The building contains 165 hotel rooms and 57 residences, as well as a yet-to-be-opened restaurant.  A November 2010 appraisal by KTR Real Estate Advisors LLC valued the hotel component of the building at $128 million and the gross sellout market value of the remaining condominiums at $86 million. 

The company blames its difficulties primarily on $20 million in outstanding mechanics' lien claims that have been asserted against it, primarily by its former construction manager, Pavarini McGovern LLC.  These claims, the validity of which is challenged by Waterscape, have prevented Waterscape from closing on the sale of additional residential units because Waterscape lacks the financial resources to bond the claims.  This has, in turn, caused Waterscape to default on a principal payment obligation to its secured lenders (who are owed approximately $134 million) according to court filings. 

In mid-March, Waterscape reached an agreement with an unrelated entity, 70 West 45th Street Holding LLC, to sell the hotel-related portion of its assets for $126,000,000 (plus a payment of approximately $2,000,000 relating to certain mortgage tax savings that would accrue to the purchaser).  That agreement nearly fell through once Waterscape determined it would need to file for chapter 11 protection, but was subsequently replaced with an April 1, 2011 agreement providing for the same purchase price but slightly different transaction mechanics.  Court filings state that this new agreement requires that Waterscape receive bankruptcy court approval of the sale by May 30, 2011 without requirement of a competitive process.  If a competitive process is required by the court, the stalking horse purchaser would be entitled to a 3% break-up fee plus an expense reimbursement if it is not the winning bidder.  According to Waterscape, the hotel sale will allow it to substantially retire its obligations to its secured creditors while retaining the ability to sell out the remaining $86 million in residential units.

Key court filings to date include the following (click on the links to access the court filings):
To access copies of all major court filings from this case, please visit: http://www.chapter11cases.com/Waterscape-Resort-LLCdba-Cassa-NY-Hotel-and-Residences_c_24426.html#axzz1IjITUtD4

Read more: Bankruptcy News & Analysis: Owner of Cassa NY Hotel & Residences Files For Chapter 11 Bankruptcy Protection http://blog.ch11cases.com/2011/04/owner-of-cassa-ny-hotel-residences.html#ixzz1IpNjeHB9
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