Gaw Capital Partners’ investment in a hip New York City hotel has pulled it into a conflict with Wells Fargo bank and US private equity heavyweight Apollo Global Management, after the Hong Kong fund manager stopped making payments on a loan last year.
The US banking giant sued the holding company of the Standard High Line hotel in Manhattan’s meatpacking district in a bid to seize the property on behalf of creditors, according to a document filed with a federal court on 1 November and cited by Bloomberg. Gaw Capital had acquired the 338-room property in October 2017 for $323 million.
The plaintiffs allege that the Hong Kong fund manager has failed to make payments on a $170 million loan since May of last year and now owes $186 million in principal, interest and fees on the boutique hotel, which stands at 848 Washington Street and straddles the High Line, an elevated rail track turned urban park in lower Manhattan.
Gaw has put the blame squarely on Apollo Global Management, which owns an 18 percent “sliver” of the loan and has rebuffed Gaw’s settlement offers, “putting their financial greed above interests of all involved including the bondholders”, Gaw Capital spokesman Kai Speth told Mingtiandi. But Apollo denied being a party to the foreclosure action, telling Bloomberg that the litigation was initiated by CWCapital Asset Management, the special servicer assigned to manage the mortgage after it went into default last year.
A History of Struggle
Gaw had purchased the 19-storey property, which it refers to as The Standard Hotel Gaw New York, from AB Green Gansevoort, a hotel management group of Standard brand founder Andre Balazs, who personally owned 20 percent of the hotel before the sale to Gaw.
Completed in 2009, the Standard High Line initially drew some controversy over its exhibitionist-friendly, floor-to-ceiling windows, which allowed guests to subject park-goers to nightly nude displays.
The 2017 deal marked Gaw Capital’s first high-profile acquisition in New York, adding to a US hospitality portfolio that includes the Hollywood Roosevelt Hotel in Los Angeles, a landmark bought by chairman Goodwin Gaw for less than $10 million in 1995.
The COVID-19 pandemic slammed the brakes on the hotel business starting in the first quarter of 2020, but the New York Post reported that the Standard High Line’s trend lines were pointing in the wrong direction even at the time of Gaw’s purchase.
The hotel’s revenue per available room, occupancy rate and food-and-beverage revenue were all down significantly since early 2014 on greater competition from new supply and home-rental service Airbnb, the newspaper said, citing industry analysts.
A Taste for Hospitality
Gaw Capital, a family-run firm with assets under management of $32.5 billion, has long been an active player in US real estate, particularly in West Coast markets.
In 2015, the firm made the second-biggest acquisition ever in the Pacific Northwest when it led the $725 million acquisition of Seattle’s Columbia Center.
In mid-2018, Gaw announced the $412 million closing of its third US value-add real estate fund, targeting opportunities in Southern California, the San Francisco Bay Area and the Pacific Northwest. A year later, Gaw purchased the Hollywood and Highland shopping mall in Los Angeles for $325 million alongside local partner DJM.
In April of this year, the Los Angeles Times reported that Goodwin Gaw had put his 1929-vintage mansion up for sale with an asking price of $21.5 million. Gaw bought the estate in San Marino, an old-money enclave about 6 miles (9.7 kilometres) from the Rose Bowl stadium, for close to $6 million in 2004.
In Asia, Gaw Capital operates its GCP Hospitality hotel management division in Bangkok and owns hospitality properties in locations including Hong Kong, South Korea, Japan, Singapore and Vietnam. The firm also manages a pan-Asian hospitality fund and a European hospitality investment vehicle.