Owners of Westin Cleveland Downtown, already mired in FBI probe, face mortgage foreclosure lawsuit

CLEVELAND, Ohio – The owners of the Westin Cleveland Downtown – currently mired in an FBI investigation into whether they helped launder money through the purchase of real estate in the U.S. – are now facing a foreclosure lawsuit for the hotel.



a group of people standing in front of a building: The Westin Cleveland Downtown, seen here in a file photo.


© Plain Dealer file photo/cleveland.com/TNS
The Westin Cleveland Downtown, seen here in a file photo.

Optima 777 owes $35 million in the unpaid principal of a mortgage for the 484-room St. Clair Avenue hotel, as well as nearly $500,000 in interest and a $1.4 million late fee, according to a lawsuit filed Friday in Cuyahoga County Common Pleas Court. The company obtained the loans from Cleveland International Fund of Cleveland Heights, a firm that connects foreign investors seeking residency in the U.S. with real estate development opportunities.

Loading...

Load Error

Cleveland International Fund CEO Stephen Strnisha said in an interview Monday that Optima 777, which owns 95 percent of the hotel, has tried to either sell or refinance the mortgage since 2019.

Once the coronavirus pandemic hit, the hospitality industry tanked following government-mandated shutdowns and a recession. Strnisha said that sunk any ability for the company to take any steps to put the hotel on better financial footing.

“I think, but for COVID, refinancing probably could have gotten done,” he said.

The foreclosure lawsuit said the fund bought the $36 million in bonds initially issued by the Cleveland-Cuyahoga County Port Authority to pay for the project. Optima first entered a forbearance agreement with the fund in February 2019, around the time the bonds became due, the suit said. The due dates were extended several times.

The last time, the date was pushed to 2022, but Optima had to pay $5 million by Sept. 15. The company missed that payment, according to the lawsuit.

Industry experts now predict that the hotel industry won’t fully recover until 2023 or 2024. The Westin closed in March and re-opened in May. Urban Farmer, the steakhouse on the ground floor of the building, remains closed.

Cuyahoga County property records also show Optima 777 owes more than $700,000 in unpaid taxes and penalties.

Strnisha said the investors’ goal now is to either sell the hotel or, more likely, take control of it and sell it when the hospitality market recovers. Either way, the aim is to make the investors whole, or as close to it as possible.

A spokeswoman for Sage Hospitality Group, which is part owner of the Westin and runs the hotel, did not immediately respond to an email seeking comment. A message left with a representative of one of Optima’s companies in Cleveland was not immediately returned.

The foreclosure lawsuit is just the latest in a string of legal problems for Optima 777 1/4 u2032s parent company Optima Ventures. The Miami-based company was once the biggest landlord for downtown Cleveland, owning multiple office buildings as it snapped up properties more than a decade ago. Its footprint has dwindled in recent years, though it still owns 55 Public Square, the Westin and One Cleveland Center.

The FBI for years has been scrutinizing Optima to see, among other things, whether Ukrainian oligarchs Igor Kolomoisky and Gennadiy Boholiubov were involved through it in laundering hundreds of millions of dollars through real estate in Cleveland and other U.S. cities.

Two forfeiture lawsuits that federal prosecutors filed in August said Kolomoisky helped siphon $5 billion from PrivatBank, a Ukrainian bank that he and Boholiubov opened in 1992. The pair took money in the form of bank loans from about 2008 to 2016, repaid them with other loans and funneled some of the money into buying property in the United States, including 5 million square feet in Ohio, prosecutors claimed.

The federal government asked a judge to order the forfeiture of office buildings Optima owns in Dallas and Louisville. The lawsuits came two days after FBI and IRS agents in Cleveland raided the offices of Optima Management Group in One Cleveland Center, as well as an office in Miami.

Optima, in a joint venture with Sage, bought the Westin, then known as the Crowne Plaza, in 2011. They closed the hotel for more than two years and carried out a $70 million renovation before re-opening it in 2014.

Strnisha that investors have no qualms about how Sage has run the Westin and would like to see the Denver-based company continue to do so. He noted that it’s not a particularly good time to sell a hotel, so the company is willing to step in to ensure the company continues to operate, should the lawsuit go their way.

“If we have to be a little bit patient, to wait for a recovery, that’s what we’re going to do,” he said.

———

©2020 The Plain Dealer, Cleveland

Visit The Plain Dealer, Cleveland at www.cleveland.com

Distributed by Tribune Content Agency, LLC.

Continue Reading

Source Article