Art at the Center of Real Estate Mogul's $4.15-Million Chelsea Hotel Feud

Art at the Center of Real Estate Mogul's $4.15-Million Chelsea Hotel Feud
The art-filled lobby of Hotel Chelsea
(Courtesy sam_lens via Flickr)

New York’s iconic bohemian paradise, the Chelsea Hotel, came upon its status in part because its former managing partner, Stanley Bard, was friendly to artists of all stripes, and would sometimes accept artwork in lieu of rent.

But it seems that the hotel is artist-friendly no longer — unless that art can turn a profit somehow. The building’s new owner, real estate tycoon Joseph Chetrit, filed a $4.15 million lawsuit (PDF) in New York earlier this month claiming that Bard deliberately misled him into believing that the artwork on the walls of the building belonged to the hotel. Because he recently found out that a number of artworks don’t actually belong to him, and that many tenants pay a lot less in rent than Bard originally said they did, Chetrit is experiencing some buyer’s remorse over the $78.5 million he paid for the business.

 

In the suit, Chetrit, via his company Chelsea Dynasty LLC, alleges that Bard and his now-dissolved company Chelsea 23rd St. Corp., “deliberately lied about their ownership of the artwork, and lied about the apartment units, the space and tenancies.” According to the suit, Chetrit only found out that the artwork did not belong to him when the artists or their successors-in-ownership showed up looking to take it away.

It seems the realization came about when Colleen Weinstein, the widow of the late nightclub owner Arthur Weinstein, came to claim various artworks made by her husband, which still hung on hotel walls. It’s unclear whether she came for the art before, after, or during the purge of residents’ artwork mandated by the new owner in November 2011.

Because of the number of items that Bard allegedly lied about during the hotel sale, Chetrit is asking the court for $2.15 million in damages for the loss of the artwork and the rent he thought he was getting, plus $2 million more in punitive damages, making for a total of $4.15 million.

In addition to the Weinstein works, the suit alleges that Chetrit was led to believe three other works belonged to the hotel: Larry Rivers’s “Dutch Masters,” an unidentified work by Gagosian-represented artist Philip Taafe, and “Bunny” by David Remfry. Together, the three works are estimated to be worth $500,000, $100,000, and $50,000, respectively. (That is, for the record, an fairly outlandish valuation, based on ARTINFO auction data for the three artists).

Complicating the issue is the fact that some of the work that Weinstein claims belongs to her is no longer at the Chelsea Hotel — it has disappeared at some point over the course of the last few years along with a number of other pieces, one of which showed up at a Sotheby’s auction in early 2011.

So why is this coming out now? It appears that it took Chetrit a while to realize the unusual ownership situation of the hotel’s artwork, partially because he was not allowed to speak to the hotel’s employees and permanent residents before the sale was finalized — a detail about which he still seems to be slightly bitter.

The complaint reads, “This prevented the plaintiff from freely obtaining information, even a hint, that could lead plaintiff to suspect that it was being defrauded.” It goes on to call out Bard, in rather spectacular language: “the wrongful conduct of defendants was outrageous, fraudulent, shocking to the consequence [sic] and deliberate.”

As a sidenote, it is worth noting that Chetrit, while claiming to have paid $2.15 million too much for the building, in the complaint notes that he paid $78.5 million for it — quite a few million less than the “more than $80 million” reported at the time of the sale. In recent weeks, he has also been accused of harrassing current hotel tenants and is involved in more than one lawsuit against them.