Restore Dyckman Marina

Summer Limbo

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“Licensees, as parties without an interest in the real property, may be removed from City property without legal process…. Accordingly, if it were not for the protection of the automatic stay in this case, the City would have been entitled to terminate long ago the licenses and recover the property for the public benefit. “

– Motion filed by the Corporation Counsel of the City of New York, May 13 2019

 
In May of 2019, the seven years of Manhattan River Group not operating the Marina concession as promised (and legally obligated) finally ended, as the docks concession was surrendered in bankruptcy court and returned to the direct control of NYC Parks.
 
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However, the Restaurant concession has remained in limbo ever since closing for the season in 2018.  To recap the saga of the Restaurant:
 
 
Currently, the site sits in a state of abandonment.  Much of the mess has been left on the Marina property, which Parks will now have to clean up (using your tax dollars).  However, the Restaurant property is also filled with trailers, dumpsters, some sort of RV and other detrius. 
 
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Complicating matters is that MRG, contrary to their promises, used the old Quonset hut for restaurant offices, telecom and Restaurant storage instead of the Marina functions they were required to.  So now those functions have to be rebuilt on Restaurant property, further junking up the site.
   
Perhaps nervous about losing the name-recognition built up since 2012, La Marina has recently updated their website and taken to various media to try and proclaim that they are “opening soon”.  The truth is a little more complicated.
 
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First of all, the city’s legal team filed in court a strongly-worded motion that was seeking  to recognize that a concession license is not a lease, and therefore should not be subject to bankruptcy protection, and therefore the city should be free to terminate the license:
 
The City respectfully submits that, in this case, cause exists for this Court to lift the
automatic stay to permit the City to terminate both the Restaurant License and the Marina License. There can be no doubt that both agreements at issue here are licenses to use real property. Both agreements are entitled “License Agreement” and each refers to the Debtor throughout as the “Licensee.” Furthermore, each agreement contains an identical provision, at Section 1.3, which states: “It is expressly understood that no land, building, space, or equipment is leased to Licensee, but that during the Interim Period (as hereinafter defined) and the Term of
the License, Licensee shall have the use of the Licensed Premises for the purpose herein after provided.” (Emphasis supplied). Section 1.3 further contains a specific restriction on the Licensee’s use of the premises: “Except as herein provided, Licensee has the right to occupy and operate the Licensed Premises only so long as each and every term and condition in this License is strictly and properly complied with and so long as this License is not terminated by Commissioner.”
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The Law Department was probably also alarmed over any possible precedent by a concessionaire running amok in bankruptcy and circumventing the approval processes spelled out in the concession agreements:
 
It appears that the Debtor intends to try to reorganize by bringing in entirely new equity owners. The Marina License and the Restaurant License contain identical provisions, at Section 14.1, which require the written approval of the City in advance of any sale, transfer, assignment, sublicense of the License, or “a majority of the shares of or interest in Licensee. . .”
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The city also filed multiple objections to MRG’s attempts to bring in a new lender and manager without following the proper process outlined in the license agreements:  
Before the City would be in a position to approve of any entity operating the restaurant as the “Manager” (as defined in the proposed Management Agreement), the City should conduct an extensive background check, the proposed Manager should enroll in the City’s Procurement and Sourcing Solutions Portal (commonly referred to as “PASSPort”) and receive clearance therein, and the City would need to
conduct a Vendor Name Check through the Department of Investigation….
 
Further, the Management Motion does not explain which persons or principals will control the Manager. Therefore, without the due diligence process discussed above, and additional information regarding the proposed ownership interests, the City will not be able to determine if doing business with the Manager is in the best interests of the City….

No operational plan was submitted with regard to the Management Agreement.  All elements of the operations of the restaurant, e.g., hours of operation, menu items and prices, entertainment (all mentioned in Section 1.2 of the Management Agreement); trade name (as mentioned in Section 4.1 of Management Agreement), including advertising and signage, are subject to the City’s prior approval. See Section 10 of the Restaurant License. Without further details, the City is not in a position to state whether it would approve any such operational plan.
MRG then filed its own objection to the city’s objections, basically arguing that although they had a license and not a lease, it should still be protected under bankruptcy law and they should have a chance to address past issues:
 
The Restaurant License Agreement is an utter necessity for the Debtor to
operate. It goes without saying that the Debtor requires the real estate on which it is
situated….

The Debtor has the right, at a hearing on plan confirmation and/or assumption of the Restaurant License Agreement, to demonstrate that it can and willsatisfy the City’s legitimate concerns, which to this day it has refused to share with this Court
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All of this was to have been settled at a court hearing on June 13, 2019.  However, at that hearing, the parties instead delayed the decision on the various motions another 30 to 45 days.   This means that it will likely be August before it is determined if MRG can or will be thrown out before they can even attempt to reorganize and leave bankruptcy.
 
That hearing at the start of August is also proposed to be the Confirmation Hearing for their bankruptcy.  MRG recently filed their Disclosure Statement and Reroganization Plan and is now seeking to have these approved by their creditors (by vote) and by the court (at the confirmation hearing). 
 
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The reorganization plan is how a debtor plans to become profitable and repay their debts.  In this case, a new lender (Waterfront Hospitality Partners LLC) will provide new funding in exchange for 18% of ownership of the reorganized debtor (let’s call it “New MRG”) after approval:
 
WHP shall be issued up to 18% of the membership interests in the Reorganized Debtor in consideration of its waiver of right to repayment of its Administrative DIP loan Claim
Waterfront Hospitality Partners LLC is not in the New York State corporation database, but it appears from its address in another court filing  to be an entity controlled by  Adam Mizrachi.  WHP is purely an investor. 
 
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It seems the current partners of MRG (Rosen, Tenenbaum, Mateo and others) will then exit and turn over the remainder of New MRG to the proposed manager entity, 348 Hudson River Partners LLC.   According to court documents, “none of the Debtor’s current management or Interest holders have any interest in the Manager.” Note that 348 Hudson River Partners LLC is also not in the state database but appears from media descriptions and financial projections to be a Brother Jimmy’s entity.
 
348 Hudson River Partners LLC shall be issued at least 82% of the membership interests in the Reorganized Debtor in consideration for its continuing obligations under the Management Agreement dated May 8, 2019, as amended, and fulfillment of its indemnification obligations set forth herein.
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The city’s attorney in the most recent hearing certainly categorized the plan as an assignment to a new ownership group (one which they are reserving their rights to object to following review):
 
We would like to, however, reserve our 13 right to raise any related issues in connection with the confirmation hearing, which since the debtor has incorporated in its plan an assumption of the restaurant license — so to the extent that we can’t reach a consensual resolution, the City would reserve its rights to make those arguments to the Court at that time.
The original MRG partners may not be walking away entirely — the Disclosure statement outlines that they will still potentially receive proceeds of their $2M lawsuit against Parks for stopping (illegal) ticketed concerts and (illegal) valet parking, but then again that lawsuit was recently moved off-calendar (indefinitely suspended), thickening the plot further…
 
 
 
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The reorganization plan requires its own voting period where the various creditors vote for the plan.  MRG is promising to pay creditors at least 40 cents on the dollar if they approve the plan, and nothing if they don’t).   The voting will likely take place between now and the Confirmation Hearing in early August.
 
Pursuant to a Court order, ballots on the Debtor’s Plan must be filed on or before August __, 2019….
 
Class 2 will be deemed to have accepted the Plan if the Plan is accepted by at least two-thirds in dollar amount and more than one-half in number of the holders of Claims actually voting of such Class….

The Code requires the Bankruptcy Court to hold a hearing on the Debtor’s request for Confirmation of the Plan after the ballots have been cast.
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Even then, La Marina, or Brother Jimmy’s, or whatever it would become, would probably need a liquor license in order to actually be profitable.  It’s hard to tell if this pertinent fact is noted in the budget projections attached to the disclosure documents, since they sloppily forgot to break out the revenue.   The City’s legal team pointed out in May how unrealistic it would be to try to operate profitably without a liquor license:
 
The Loan Motion suggests that the Debtor will be able to commence operations
in May. As noted above, however, the Debtor does not yet have an approved operation plan; moreover, it is far from clear that the Debtor can obtain the necessary permits to operate, even if the City were to approve any such operations plan.
 
The proposed budget attached to the Loan Motion appears to be unrealistic.
For example, it appears to assume that the Debtor will obtain a liquor license and that the City would approve the operation of a beer garden. There appears to be no credible basis for the Debtor’s assertion, that “the Debtor expects to be operating at or close to break even in the upcoming months.”
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So, IF the court doesn’t allow the City to terminate MRG’s concession in late July, and IF the proposed investor and manager and concession assumption are approved by the city, the courts and creditors sometime in August, and IF a liquor license can be obtained after that or they choose to try and operate without one… that’s a lot of IFs, and it likely means no one will be pulling up to La Marina in a yacht this summer.   
 
Is it possible we will see a new restaurant emerge with new ownership sometime before the restaurant concession season ends in October, operating initially without alcohol?  Maybe.  (And that itself would be quite the welcome, departure from the booze-soaked past at this public parkland site.)  But it’s not certain and it’s definitely not “Opening Soon”.
 
Stay tuned to see if Manhattan River Group will be removed from the site once and for all, and if both of Dyckman Marina’s concessions will now finally be restored to proper use.
 

 
UPDATE #1 – As an outcome of the June 13th hearing, an amended disclosure statement has been filed.  The Confirmation Hearing has been scheduled for July 29 at 11 am at the court, and the creditors will be voting on the plan from now until July 22.  It is not public knowledge at this time how New York City, the largest creditor, will be voting.
 

UPDATE #2 – All matters that were to be decided on July 29th have been adjourned to a hearing on August 5th.  The city seems to still be in discussion with 348 Hudson River Partners about approving their assignment of the restaurant concession license from the prior operators.


UPDATE #3 – The court approved the reorganization plan, clearing the way for the facility to reopen later this year under new owners and a new name.  Many detailed questions remain.

 


 
 

2 thoughts on “Summer Limbo

  1. hi! you seem to have a lot of information about La Marina, was wondering if I could email a specific question as opposed to commenting?

    Like

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