Bankrupt Manhattan Holiday Inn Approved to House Asylum Seekers

A judge will allow the world’s tallest Holiday Inn hotel to house asylum seekers and migrants in Manhattan’s Financial District despite the hotel mortgage lenders’ concerns over wear and tear and “reputational harm.”

US Bankruptcy Judge Philip Bentley said during a hearing Monday that he would approve Golden Seahorse LLC, which does business as Holiday Inn Manhattan Financial District, to sign a contract with the New York City Health and Hospitals Corporation. The deal is estimated to bring in about $10.5 million in additional revenue to the hotel, which is 50 stories tall.

The deal comes as hotels nationwide face potential bankruptcies and restructurings this year due to increased interest rates and staffing costs.

A group of secured lenders, including Wilmington Trust and Triangle Capital Group LLC, say the bankrupt hotel owes them about $137 million. The lenders have argued that the contract presents significant potential risks to the value of the property. Wilmington Trust, a subsidiary of M&T Bank that holds the debt on behalf of investors, is owed $87 million. The hotel company owes another $50 million to Triangle, according to court papers.

The lenders’ concerns include potential wear and tear to the property, reputational harm, and “becoming identified in the market as an asylum seeker residence,” according to its objection. They also had concerns over reports that occupants at other city migrant housing locations have created fire hazards by bringing in hot plates and other cooking equipment.

The judge said Monday that while the lenders’ concerns about the property are serious, the revenue to be brought in outweighs any harms that are likely to result.

“The risks are real, and I certainly am not able to say with confidence that none of the possible harms they identify will ultimately come to pass,” Bentley said. “My job though, is not to claim to have a crystal ball.”

The lenders also said they worry that asylum seekers could turn from guests to residents, entitling them to eviction prevention rights.

The 492-room hotel would house roughly 1,000 migrants until at least August, and potentially until April 2024, according to court records. Under the contract, the public hospital system would pay the hotel $190 per night, working out to about $5 million this year and potentially $5.5 million next year.

The hotel would be the fifth in Manhattan to be converted to house a wave of about 40,000 migrants that entered the city in the last year, Chris Keeley, the NYCHHC employee managing the migrant housing program, said during testimony presented Friday.

Golden Seahorse’s November Chapter 11 filing in the US Bankruptcy Court for the Southern District of New York followed a foreclosure dispute with lenders. It filed for bankruptcy protection after pandemic-related setbacks drove the Lower Manhattan property to default on its loan.

The case is In re Golden Seahorse LLC, Bankr. S.D.N.Y., No. 22-11582, hearing 1/30/23.