Historic Lower East Side hotel files for bankruptcy amid pandemic woes

Settenbrino then leased the hotel to businessman Eli Idi in May 2015, a move Settenbrino describes in the filing as “a huge mistake.” Idi converted the building into a hostel and fell behind on real estate taxes and rent, and the building started falling into disrepair, according to Settenbrino’s affidavit.

Idi then defaulted on an agreement to pay these back taxes and rent, abandoned the building when the pandemic hit in March 2020 and still owes Settenbrino’s company more than $3.3 million, court papers say. He also sued Settenbrino later that year, claiming he had the right to buy the hotel for $18 million with a $2 million credit, making it impossible for Settenbrino to sell the hotel or get new financing for it, according to the affidavit.

Settenbrino reclaimed the hotel after Idi left and said he found it now had several maintenance issues, including a broken elevator, an HVAC and fire suppression system in need of repairs, severe water damage and a commercial kitchen floor “on the verge of collapse.” He worked with his family and community volunteers to renovate the hotel, which remained shut down thanks to the pandemic until September 2021, the affidavit says.

An attorney for Idi did not respond to a request for comment about these accusations by press time.

While the hotel was shut down, Settenbrino started negotiating with the nonprofit Not On My Watch to use the building as a homeless shelter, and the organization signed a letter of intent to lease the property in April 2020, according to the affidavit. However, this transaction fell through after the hotel’s lender filed to foreclose on the property in September 2020, despite New York’s moratorium on commercial foreclosures that was still in place at the time, court papers say.

Despite these setbacks, Settenbrino strikes a more optimistic tone toward the end of the affidavit and indicates that he does not expect the bankruptcy protection filing to lead to the end of the Blue Moon Hotel. The company plans to file a reorganization plan to extend and modify its mortgage, and it expects revenues to increase as the impact of the pandemic wanes and tourism increases. He notes that bookings have already increased with mask mandates ending and describes the company’s core business as “fundamentally sound” and “improving every month.”

David Wander, an attorney with Tarter Krinsky & Drogin representing the hotel, echoed this point and stressed that the hotel plans to emerge from the bankruptcy with a strong path forward.

“The plan is to revitalize the business as New York rebounds from the pandemic and tourism is coming back,” he said. “They’ll increase the occupancy and then the room rates, and then we’ll negotiate with the lender to restructure the mortgage.”

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