The developers behind Miami Beach’s Goodtime Hotel are facing significant legal challenges over a payment guarantee linked to a $149.3 million mortgage that is allegedly in default.
Eric Birnbaum and Michael Fascitelli claim that CIM Group is improperly attempting to collect at least $10 million from them under a payment guarantee—even if they hand over the 266-room hotel at 601 Washington Avenue through a deed-in-lieu of foreclosure. This allegation was raised in a counterclaim filed this week in New York Supreme Court against an affiliate of the Sacramento-based lender.
In July, the CIM affiliate sued Birnbaum and Fascitelli—who lead New York-based Imperial Companies—alleging they breached the guarantee by failing to make the $10 million payment and by surrendering the property, which is part of Marriott’s Tribute Portfolio.
CIM’s affiliate asserts that the Imperial Companies entity that owns the Goodtime Hotel failed to repay approximately $149.3 million when the loan matured last year.
Attorneys representing Birnbaum, Fascitelli, and CIM all declined to comment on the matter.
The Goodtime Hotel opened to much attention in 2021. At the time, Birnbaum and Fascitelli highlighted celebrities Pharrell Williams, hospitality entrepreneur David Grutman, and designer Ken Fulk as project partners. The hotel was developed with a $45 million construction loan following their $36 million acquisition of the property in 2015.
A lawyer’s costly mistake
According to court documents, the hotel’s owners signed the payment guarantee in 2021 when they secured $164 million in financing from CIM, later reduced to $152 million. Birnbaum and Fascitelli allege that the agreement was intended to require them to cover only three months of carrying costs if the lender foreclosed on the property or if the owners transferred it via a deed-in-lieu of foreclosure.
However, their attorney, Gary Axelrod of the Chicago-based firm Latham & Watkins, allegedly overlooked a drafting error in the agreement that failed to specify this three-month limit. As a result, the obligation for operating costs, taxes, and debt service could be interpreted as continuing indefinitely until the hotel became profitable, according to the counterclaim.
Axelrod reportedly did not recognize the error until 2023, when Birnbaum and Fascitelli were considering a deed-in-lieu of foreclosure due to the hotel’s lack of profitability. The attorney allegedly advised them to delay action until the property’s financial situation improved. Axelrod did not respond to requests for comment.
Birnbaum and Fascitelli allege that the CIM affiliate has tried to exploit the mistake by refusing to amend the agreement, arguing that the owners could remain liable indefinitely. The lender is also accused of using the flawed payment guarantee to pressure Birnbaum and Fascitelli into a forbearance agreement in 2023 and to obtain a $10 million supplemental guarantee, according to the counterclaim.
The alleged mortgage default
Birnbaum and Fascitelli contend that the CIM affiliate repeatedly delayed their attempts to complete a deed-in-lieu of foreclosure and initiated a UCC foreclosure process, which it ultimately did not pursue. The counterclaim further alleges that the lender undermined their efforts to refinance the debt by increasing the payoff amount by more than $20 million, making refinancing unfeasible.
In its lawsuit, the CIM affiliate states it sent the hotel entity a deed-in-lieu of foreclosure notice in January, but claims the owners failed to provide the necessary closing documents and meet other requirements to transfer ownership. The following month, after demanding the $10 million payment, the lender granted Birnbaum and Fascitelli additional time to complete the deed-in-lieu, but they did not meet the deadlines.
Birnbaum and Fascitelli are now asking the court to rescind the payment guarantee agreement or to amend it to clarify the intended three-month carrying cost requirement.
