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Mostly Cloudy Allegria Hotel sold at auction for $27.4 million
Manhattan-based investment firm submits winning bid
After years of financial setbacks and two Chapter 11 filings, the Allegria Hotel, which opened to great fanfare in 2009 — the first upscale hotel to open in Long Beach in decades — was sold at a bankruptcy auction on Tuesday for $27.4 million.
The winning bid was submitted by the hotel’s mortgage lender, Stabilis Capital Management LP, a Manhattan investment firm. Stabilis is a successor to Brooklyn Federal Savings Bank, the original mortgage provider, which held a $38 million note on the Allegria property.
In February, Stabilis sued to foreclose on the hotel, saying that the mortgage note had become due in 2014, together with interest and other costs. Stabilis claimed it was owed $31.7 million plus interest and fees, according to court documents.
The pending sale is subject to court approval — scheduled for July 26 in U.S. Bankruptcy Court for the Southern District of New York — although the deal is not expected to be finalized until the fall, according to people with knowledge of the auction who declined to be identified.
“Stabilis is excited to have won the bid and is passionate about this property,” the company said in a statement. “We believe strongly in the potential of the Allegria Hotel and, if the [bankruptcy] trustee approves the sale process, we look forward to making capital improvements and other investments in the property. We plan to establish the Allegria as a truly top-notch boutique hotel.”
The hotel’s former owner, Allen Rosenberg, bought the King David Manor property, at 80 W. Broadway, for $21 million in August 2007.
Operated by Alrose Allegria LLC, the posh 143-room, 124,000-square-foot oceanfront hotel filed for Chapter 11 protection last year in U.S. Bankruptcy Court. Court documents show that the hotel has debts totaling $39.1 million, and the property is valued at the auction sale price, $27.4 million.
Last year marked the second time in four years that the Allegria had filed for bankruptcy, after the State Department of Taxation and Finance slapped seizure notices on a third of the hotel’s rooms because it owed $6 million in back taxes.
Tuesday’s bidding began at $24 million — all prospective bidders had to present $2 million bank checks — and the sale was free of any monetary liens.
The auction, conducted by Central Islip-based Maltz Auctions, took place in the hotel’s rooftop lounge and attracted a mix of potential buyers, developers, business owners and local residents. A total of nine bids were submitted.
In April, Highgate Management took over operations at the hotel, and has “implemented and is continuing to introduce countless upgrades/modifications to enhance safety, efficiency and profitability,” the firm said in a statement in June.
“I’m confident that it’s going to be continued as a hotel, and the current management is going to stay on,” Ken Silverman, a Chapter 11 operating trustee appointed by the court, said of the hotel and Stabilis after the auction. “I believe [Stabilis has] experience in the hospitality industry.”
Silverman emphasized that all weddings and other events would take place as scheduled, and that the hotel was accepting new event bookings and hotel reservations. “The hotel is going to continue to operate, and we’re honoring all events and we’re still going to be booking,” he said. “And the summer season has been spectacular so far — [the hotel has] either been substantially or fully occupied.”
If the new owner decides to change the use of the building, it would require approval by the city.
“While the bankruptcy process is not under the city’s control, we are hopeful that the property will continue to be used as a hotel, which is in the city’s economic interest,” City Manager Jack Schnirman said.
Among those who attended the auction were representatives of the Engel Burman Group, which owns an adjacent vacant property, but President Jan Burman told a reporter that his development firm did not bid on the hotel. Potential buyers included a company that owns catering and hotel properties, and others who had hoped for a chance to snatch the Allegria for a bargain.
“We wanted to see what the numbers were,” said Sam Djonovic, a former restaurant manager at the Allegria who now co-owns S&H Consulting, a restaurant consulting firm in Hicksville. “We thought it was a fire sale.”
Between the economy, Hurricane Sandy and poor management decisions, Djonovic and his business partner, Jonathan Nieves, said the Allegria has had its share of missteps since it opened. “They put a lot of their finances into building it,” Djonovic said. “You’re a boutique hotel on the beach — how could you fail?”
In an interview with the Herald in 2012, Rosenberg said that after the economy tanked in 2008, construction of the hotel went over budget by approximately $25 million, and construction delays resulted in a late opening in the fall of 2009.
The hotel’s financial problems had long been public knowledge, though things seemed to take a positive turn in 2012, prior to Sandy. Alrose first filed for Chapter 11 protection in July 2011, claiming $10 million to $50 million in liabilities to more than 50 creditors, but a year later, a U.S. Bankruptcy Court judge approved a reorganization plan allowing Alrose to pay off or restructure its debts.
Nieves, a former banquet manager at the hotel, said that a new owner could potentially turn things around. “Right now they’re operating as a management company,” he said. “If the owner comes in and does the right thing, this place can actually be a place that Long Beach has never had before. But if they continue to do what they’ve been doing, over time, it’s just going to be the same thing.”
