“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
- Awarded to Manhattan River Group in 2007 via RFP process.
- Design of restaurant approved by Public Design Commission in 2011.
- Opened 2012, under different name, capacity and uses than originally promised.
- Operated 2012-2018 with a host of issues, including a 2014 shooting and of course the massive traffic and valet parking problems.
- Parks finally stopped the ticket concerts and valet parking in July 2018, which greatly calmed traffic and other issues.
- However, a new (illegal) indoor concert area and operating (without permission) off-season remained as problems through fall 2018.
- The restaurant’s liquor license was suspended in December 2018, later made permanent. Manhattan River Group then sued the city for damages for stopping the concerts and valet parking and declared bankruptcy.
- In bankruptcy court throughout 2019 to date as debtor-in-possession but has not re-opened for business due to a lack of funding to do so.
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.”
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. . .”
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.
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
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
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
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.
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.
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.
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.”
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.