With Hotel Late on Rent, Herald Square Tower Nears Foreclosure

A prominent fixture of Midtown’s Herald Square, 960 Sixth Ave., appears to be heading toward foreclosure as its financial troubles mount.

As first reported by Crain’s, the troubled tower’s main commercial tenant—a hotel fittingly known as The Herald, run by the hotel company LuxUrban—was hit with an eviction notice in July, after failing to pay $1.6 million in back rent. Now, the hotel’s landlords have been hit with a suit of their own by a lender, after they defaulted on a $55-million mortgage payment this month.

The latest suit was at least partially precipitated by LuxUrban’s reportedly failing to pay rent to The Herald’s landlord, 960 Associates, between June and December of last year, court records show. A judge allowed 960 Associates to oust the hotel by July 18, although the hotel appealed and still appears to be in operation as of Aug. 26, when Chelsea News stopped by for a visit.

The lender in the suit filed against 960 Associates on Aug. 25, Aareal Capital Corporation, is also suing LuxUrban. Yet Aareal is singling out Victor Tawil and Elyahu Cohen, two representatives of 960 Associates, as “guarantors” of loan terms that they say have been violated.

The suit goes into detail about the relevant mortgage for 960 Sixth Ave., which amounted to $60 million and was granted in 2018. Its original maturity date was set for August 2021, but was extended multiple times, with the last extension expiring on Aug. 15 this year.

“As of August 25, the outstanding Loan debt, including principal, accrued contractural and default interest, plus late fees and other charges totaled $55,175,563.93,” lawyers for the plaintiffs write. They add that Aareal will be seeking to foreclose on the mortgage and will direct the sale of 960 Sixth Ave. to “satisfy the indebtedness it is owed,” and establish a rent receiver to collect owed rent.

Aareal’s suit also charges that 960 Associates violated other terms, such as failing to keep the required “minimum balance”—$367,921—in a “Debt Service Subaccount”; this represented “one month of anticipated debt service payment(s) that Aareal could draw upon if [960] failed to pay timely debt service in a particular month.” In July, 960 Associates reportedly had more than $166,000 worth of debt service in arrears.

The trouble stemming from The Herald can’t help matters, and is seemingly inextricable from LuxUrban’s recent pattern of corporate chaos. As pointed out by Crain’s, LuxUrban has not always been the best steward of the hotel, with some online reviewers slamming the company for poor conditions. However, it does maintain a 4-out-of-5 rating on the website Tripadvisor, and is ranked somewhat near the middle of the pack at No. 361 on the travel service’s list of 510 hotels in NYC.

One patron named “Lvv” wrote a review proclaiming that The Herald was, quote, “an attack on health.” They added that “cleanliness is extremely rough . . . [on] some sections of the wall there is also a sign of the presence of mold.”

LuxUrban also owes a $1.2-million fine to New York City for renting out AirBnB units illegally, which involved 4,300 guests circulating through 67 apartments. They’ve also been delisted from the Nasdaq for cash-flow issues, saw a temporary CEO resign in June, and are facing a class-action lawsuit from shareholders due to misrepresentation of their ownership stake in multiple hotels.