The Real Deal‘s Adam Pincus goes above and beyond in his investigation of Sam Chang’s recent sale of a West 41st Street apartment building/illegal hotel to a group of Israeli investors, a deal that popped up in city records just this week.
According to Mr. Pincus, “Units in the building, located in the shadow of the Port Authority overpass between Ninth and 10th avenues, are available as nightly hotel rooms, a guard at the building told a reporter Monday night. The building has no signage identifying it as either a short- or extended-stay hotel.”
But Mr. Chang, “in a telephone interview from China, said he never rented units in the building for less than 30 days. He added that he has not controlled the property for several months.”
While Mr. Chang’s use of the building, and the intentions of the new buyers, the Israel-based Aura Investments, remain unclear, Mr. Pincus does dive into the intricacies of the transaction”
The sale of the building was the final piece of a complex transaction in which Chang, the CEO of McSam Hotel Group of Great Neck, L.I., relinquished ownership of the Hilton Garden Inn in Tribeca to the Pennsylvania real estate investment trust Hersha Hospitality Trust in exchange for the forgiveness of $19 millions in development loans and other considerations. According to Hersha filings with the U.S. Securities and Exchange Commission, the REIT bought 440 West 41st Street in July 2006 for $21.9 million, and immediately net leased it to Chang. But in a related transaction, in May 2009, Hersha obtained a 49 percent interest in Chang’s Hilton Garden Inn in Tribeca, at 6 York Street at Sixth Avenue, and then in June, Hersha took the remaining 51 percent interest. That was in exchange for giving Chang a financial package worth $67 million that included a cash payment of $4.8 million, the forgiveness of $19 million in development loans spread between 6 York as well as Chang’s Hotel Reserve at 51 Nassau Street, the assumption of a $30 million first mortgage at 6 York and other considerations, securities filings say. Then in September 2009, Hersha transferred its entire ownership interest in the 440 West 41st Street property to Chang, who then sold it in March.
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