The Public Hotel, a prominent fixture on Chrystie Street in New York City’s Lower East Side, is facing a UCC foreclosure auction on its equity. This development signals continued financial strain for the hotel, developed by Steve Witkoff and Ian Schrager, even after previous efforts to manage its debt.
The upcoming auction, scheduled for September 12th and managed by Mannion Auctions’ Matthew Mannion, stems from over $86 million in mezzanine debt owed by Witkoff and Schrager. The lender initiating the foreclosure is Värde Partners, a credit-investment firm. The specifics of Värde Partners’ acquisition of this debt remain unclear, although records indicate the entity used to purchase the loan was established last October. Previously, the mezzanine loan was held by Korean lender Shinhan Investment Corp., who had attempted to sell it in 2020.
Representatives for Witkoff, Schrager, and Värde Partners have not yet responded to requests for comments regarding the situation at the 367-room Public Hotel, located at 215 Chrystie Street.
The 28-story building, which combines the hotel with 11 luxury condominiums, first opened in 2017. Like many in the hospitality sector, The Public Hotel was forced to temporarily close its doors during the pandemic. While it celebrated a reopening in the summer of 2021, financial challenges soon resurfaced. By the following year, Witkoff and Schrager had defaulted on their substantial $189 million senior mortgage.
It appeared the financial tide might have turned when Madison Realty Capital and Newbond Holdings acquired the senior debt from Deutsche Bank and Aareal Bank late last year, seemingly allowing the developers to become current on their loan. However, this UCC foreclosure suggests the reprieve was short-lived and underlying financial pressures persist for The Public Hotel On Chrystie Street.
The broader hotel industry is currently navigating a complex recovery. While there has been progress since the pandemic’s peak, signs of distress are emerging across the sector. Recent examples include Park Hotels & Resorts’ decision to cease payments on a massive $725 million CMBS loan linked to major San Francisco hotels, and Sharif El-Gamal’s ongoing efforts to prevent foreclosure at his Margaritaville hotel in Times Square. These instances, alongside the situation at the Public Hotel on Chrystie Street, highlight the ongoing financial vulnerabilities within the hotel market.
While the auction looms, the future ownership and operation of the Public Hotel on Chrystie Street remain uncertain. The outcome of the September auction will determine the next chapter for this Lower East Side landmark.
