"Last straw" for NYC hotel industry?

David Goldsmith

All Powerful Moderator
Staff member

Capstone and Highgate’s Maxwell hotel facing foreclosure​

Midtown hotel is second hospitality property to fall into trouble this week​

The shuttered Maxwell hotel in Midtown is facing foreclosure, the second big hospitality property to suffer that fate in as many days.
Real estate private equity firm Yellowstone Real Estate Investments filed Tuesday to foreclose on the 697-room hotel at 541 Lexington Avenue, court records show.

Joshua Roshanzamir’s Capstone Equities and Highgate Hotels bought the hotel for nearly $183 million in 2018, according to property records. Yellowstone’s lawsuit, however, lists Dune Real Estate Partners as a defendant that guaranteed the $140 million acquisition loan made at the time by LoanCore Capital.
Yellowstone bought the debt from LoanCore in March and said it’s owed more than $182 million.
The hotel shuttered its doors in April 2020 and the borrowers failed to repay the loan at its May 2021 maturity date, according to the lawsuit.
Representatives for the involved parties did not immediately respond to requests for comment.

The Maxwell is the latest in a series of Manhattan hospitality properties to fall into distress.
On Monday, Wells Fargo filed to foreclose on David Werner’s fee position at the 1,331-room Row Hotel.
The bank, which acts as the trustee for bond investors who hold the $275 million mortgage on the property, said Werner started missing payments on the loan in May 2020.
Earlier this month, Bank Hapoalim filed to foreclose on Hidrock Properties’ development site in the Financial District, where the developer planned to build a 286-key hotel.
Isaac Hera’s Yellowstone has been active in New York’s distressed hotel market. The company last year bought the 600-room Watson Hotel at 440 West 57th Street for $175 million.
 

David Goldsmith

All Powerful Moderator
Staff member
Owner’s feud with Four Seasons leaves Midtown hotel in limbo

Shuttered property missed spring reopening target, claiming construction​

The owner of a Manhattan Four Seasons is not backing down in an alleged dispute with the hotel chain, keeping the iconic Midtown property shuttered.
The hotel at 57 East 57th Street may be closed for years due to the feud between Ty Warner and the brand, people familiar told the New York Post. The hotel previously said it was targeting reopening in the spring of 2022, but its website says infrastructure and maintenance work could last “well into” the year, which is nearly over.

The property’s street-level windows are shrouded in brown paper, and an operator at a nearby restaurant told the outlet they hadn’t seen evidence of construction work at the property.
Upkeep at the Four Seasons is a costly endeavor. Warner— the Chicago billionaire behind iconic toy brand Beanie Babies — has reportedly balked at operating costs as the hotel lost money, even in the years before the pandemic decimated the city’s hospitality industry. The hotel chain, meanwhile, has little interest in adjusting its fees to match the profitability levels of the hotel.

It’s the kind of dispute that could linger for years, industry experts told the Post. The two sides have been quietly negotiating for 18 months, but progress has been hard to come by.

The standoff was reported last November, when the a representative of the hotel workers’ union told the Post preparations were taking place to reopen the 57 East 57th Street property in the spring, despite the dark clouds being cast by the dispute.

The feuding foes are on the same side of another issue at the hotel, this between its employees and those who run and manage the property. A proposed class-action suit filed in August claimed the hotel’s reopening was being stalled to duck millions in unpaid wages and severance.
Warner, a reclusive billionaire behind the famed toy line, purchased the property in 1999 for $275 million, seven years after the hotel opened. It cost $475 million for the hotel to be developed.

The Four Seasons doesn’t own any of the properties in its portfolio, instead operating the hotels on behalf of owners. That opens the company up to disputes when the two parties fail to see eye-to-eye.

user-matching
 

David Goldsmith

All Powerful Moderator
Staff member

Lights out: Why more than 10,000 hotel rooms remain closed​

Some New York City properties were struggling before pandemic​

The DoubleTree Metropolitan is a quintessential Manhattan hotel.
Not a five-star, white-glove venue or hip party spot, but part of the lifeblood of the city’s hospitality industry — the big lodges with hundreds of rooms that cater to the masses of business travelers and tourists who visit each year.

While the vast majority of hotels are back up and running, the DoubleTree’s rooms are among thousands that remain stubbornly vacant at hotels that never reopened following the pandemic shutdown.
“There’s a huge financial storm hanging over most of these hotels,” said Vijay Dandapani, president of the Hotel Association of New York City. “If you’re a hotel that’s still closed, you need to have real compelling financial reasons.”
Two years after hotels began to turn their lights back on, 46 New York properties with more than 10,400 rooms remain closed, according to the hotel data company STR. That represents 8 percent of the city’s room inventory.

For comparison, 3 percent of hotel rooms in Orlando and Los Angeles are closed. In Miami and Chicago it’s 2 percent and 1 percent, respectively.
New York’s mothballed inventory persists despite a severance-pay law designed to force them to reopen, and high occupancy at the city’s open hotels — 86 percent for the four weeks ending Oct. 1, according to STR. It was 91 percent during the same period in 2019, before the pandemic.
Several factors explain the lingering closures. While leisure tourism has bounced back, business travel has yet to return to full strength. And while tourism shut down, hotel construction didn’t, adding supply to a struggling market.
New York hotel construction didn’t shut down with the pandemic. In the two years since 2020, the number of hotel rooms grew by 15 percent, according to STR.
“Part of this is about supply growth,” said Romy Bhojwani, director of hospitality market analytics at STR parent company CoStar Group.
Bhojwani said that if the 10,000-plus shuttered rooms were back online, the city’s occupancy figure would be a few points lower.
When the pandemic hit, New York was in the midst of a long, historic hotel development boom that had diluted the market with tens of thousands of new rooms. Tack on rising labor costs and higher property taxes, and many properties were already struggling even before Covid.
Some of the factors keeping hotels closed, however, are unique to each property.
At the moribund Four Seasons in Midtown, for example, billionaire owner Ty Warner is at odds with the hotel’s management company over operating costs and losses.
The Roosevelt Hotel has long been mired in an international dispute involving its owner, the Pakistani government, and an Australian mining company.
At other hotels, owners are coming to terms with a correction in values.
The Doubletree Metropolitan was finally unloaded in January by RLJ Lodging Trust for $146 million, a steep discount to the $332 million it had paid in 2010.
The buyer, Los Angeles-based investor Hawkins Way Capital, did not respond to requests for comment on its plans for the hotel.
Another large closed hotel, the Maxwell NYC, fell into foreclosure in September.
And the 655-key New York Marriott East Side has been snarled in litigation. The German lender DekaBank in 2016 sued its partner in its 2015 purchase of the hotel, Ashkenazy Acquisition, for allegedly reneging on a commitment to take over the property. DekaBank then filed to foreclose on Ashkenazy last year. A judge granted DekaBank summary judgment in August, allowing the case to move forward.
The three hotels were on a list of 10 closed properties that the City Council suggested this month could offer intake and relief services to asylum seekers.
At least one of the properties, though, is gearing up for regular customers.
The Hilton Times Square was purchased by Apollo Global Management and Newbond Holdings this summer for $85 million after the previous owner, California-based REIT Sunstone Hotel Investors, handed the keys back to a special servicer last year.
The hotel is set to reopen later this year.
 

David Goldsmith

All Powerful Moderator
Staff member

Urban Commons in danger of losing FiDi hotel​

Westbrook moves to foreclose on property it sold in 2018​

Legal issues continue to mount for Los Angeles hospitality firm Urban Commons. It is now facing the loss of the hotel portion of The Wagner at the Battery in Lower Manhattan as a lender attempts to foreclose on the asset.
The lender, an entity tied to Westbrook Partners, claims that Urban Commons defaulted on a $96 million loan that matured in December of 2020, according to documents filed in Manhattan.

Westbrook, along with joint venture partner Millennium Partners, sold the property to Urban Commons in a $147.3 million deal in 2018. Westbrook then issued a loan for the hotel portion of the site, located at 2-10 West Street.
The 36-story tower, which sits across from Battery Park City, is split between a hotel operated by Leading Hotels of the World, which covers the first 12 floors, and 120 condo units above them.
The hotel closed in early 2020 and has yet to reopen. Calls to the hotel go to a recorded message that says it is “temporarily closed.”
According to the lawsuit, Westbrook sent Urban Commons a notice of default in April 2021. The lender claims that Urban Commons has yet to cure the default.
Urban Commons founder Taylor Woods responded Monday with a 150-word statement blaming Westbook for the Wagner’s problems. It began, “Urban Commons has no intention of ever giving up the property.”
Woods said as soon as his company bought the property from Westbrook, which became the mortgage holder, Urban Commons was prevented “from executing a well-planned and comprehensive renovation, including a substantial conversion of the hotel from the independent and generic brand into a vibrant and stunning first-class luxury hotel.”
The statement continued that Urban Commons “was thwarted every step of the way” and that Westbrook, which “overtly misled” Urban Commons from the start, “now seeks to further interfere.”
Woods added a threat, vowing that his firm’s legal strategy will “ensure that all of the parties that bear legal and financial responsibility … will not be able to avoid bearing the full burden of damages and liability.” Those parties apparently include the Battery Park City Authority, which owns the land under the hotel and was sued by Urban Commons in May for allegedly delaying the replacement of Highgate Hotels as the hotel’s operator after it left in 2020.
The latest lawsuit adds to a list of legal entanglements involving the property.
In 2019, brokerage firms Luxury Property Group and Real Estate Wealth Advisors sued Westbrook and Millennium, alleging that they were not paid a commission for finding the buyer and remaining involved in the sale throughout the negotiations.
This April, Highgate sued Urban Commons, claiming the latter only covered $19.2 million of Highgate’s $42 million in operating expenses. Highgate said it was unable to pay wages because of the shortfall.
Urban Commons’ top executives are also facing lawsuits on different projects. Last November, a Delaware bankruptcy court judge held Howard Wu and Taylor Woods, who also operate a company called Eagle Hospitality Real Estate Investment Trust, in contempt for failing to account for the proceeds of a Paycheck Protection Program loan. The pair was also sued by an investor who claims he was defrauded out of $1 million.
 

David Goldsmith

All Powerful Moderator
Staff member

Lights out: Why more than 10,000 hotel rooms remain closed​

Some New York City properties were struggling before pandemic​


The DoubleTree Metropolitan is a quintessential Manhattan hotel.
Not a five-star, white-glove venue or hip party spot, but part of the lifeblood of the city’s hospitality industry — the big lodges with hundreds of rooms that cater to the masses of business travelers and tourists who visit each year.
While the vast majority of hotels are back up and running, the DoubleTree’s rooms are among thousands that remain stubbornly vacant at hotels that never reopened following the pandemic shutdown.
“There’s a huge financial storm hanging over most of these hotels,” said Vijay Dandapani, president of the Hotel Association of New York City. “If you’re a hotel that’s still closed, you need to have real compelling financial reasons.”
Two years after hotels began to turn their lights back on, 46 New York properties with more than 10,400 rooms remain closed, according to the hotel data company STR. That represents 8 percent of the city’s room inventory.

For comparison, 3 percent of hotel rooms in Orlando and Los Angeles are closed. In Miami and Chicago it’s 2 percent and 1 percent, respectively.
New York’s mothballed inventory persists despite a severance-pay law designed to force them to reopen, and high occupancy at the city’s open hotels — 86 percent for the four weeks ending Oct. 1, according to STR. It was 91 percent during the same period in 2019, before the pandemic.
Several factors explain the lingering closures. While leisure tourism has bounced back, business travel has yet to return to full strength. And while tourism shut down, hotel construction didn’t, adding supply to a struggling market.
New York hotel construction didn’t shut down with the pandemic. In the two years since 2020, the number of hotel rooms grew by 15 percent, according to STR.
“Part of this is about supply growth,” said Romy Bhojwani, director of hospitality market analytics at STR parent company CoStar Group.
Bhojwani said that if the 10,000-plus shuttered rooms were back online, the city’s occupancy figure would be a few points lower.
When the pandemic hit, New York was in the midst of a long, historic hotel development boom that had diluted the market with tens of thousands of new rooms. Tack on rising labor costs and higher property taxes, and many properties were already struggling even before Covid.
Some of the factors keeping hotels closed, however, are unique to each property.
At the moribund Four Seasons in Midtown, for example, billionaire owner Ty Warner is at odds with the hotel’s management company over operating costs and losses.
The Roosevelt Hotel has long been mired in an international dispute involving its owner, the Pakistani government, and an Australian mining company.
At other hotels, owners are coming to terms with a correction in values.
The Doubletree Metropolitan was finally unloaded in January by RLJ Lodging Trust for $146 million, a steep discount to the $332 million it had paid in 2010.
The buyer, Los Angeles-based investor Hawkins Way Capital, did not respond to requests for comment on its plans for the hotel.
Another large closed hotel, the Maxwell NYC, fell into foreclosure in September.
And the 655-key New York Marriott East Side has been snarled in litigation. The German lender DekaBank in 2016 sued its partner in its 2015 purchase of the hotel, Ashkenazy Acquisition, for allegedly reneging on a commitment to take over the property. DekaBank then filed to foreclose on Ashkenazy last year. A judge granted DekaBank summary judgment in August, allowing the case to move forward.
The three hotels were on a list of 10 closed properties that the City Council suggested this month could offer intake and relief services to asylum seekers.
At least one of the properties, though, is gearing up for regular customers.
The Hilton Times Square was purchased by Apollo Global Management and Newbond Holdings this summer for $85 million after the previous owner, California-based REIT Sunstone Hotel Investors, handed the keys back to a special servicer last year.
The hotel is set to reopen later this year.
 

David Goldsmith

All Powerful Moderator
Staff member
City Planning votes to restrict hotel development

Commission approval sends issue to City Council​

Hotel developers in New York City may soon face a large obstacle to getting their projects approved.
The City Planning Commission on Wednesday approved a zoning text amendment to require special permits for all new hotel construction, sending the proposal on to the City Council.
Only two commissioners, Richard Eaddy and Anna Levin, voted against the plan, which is opposed by the real estate industry and even some de Blasio administration planners. Levin cited concerns that the citywide permit requirement was not the best way to address as-of-right hotel development that clashes with its surrounding neighborhood.

Anita Laremont, named to chair the commission and head the Department of City Planning last month by Mayor Bill de Blasio, voted in favor of the proposal without comment.

Commissioner Alfred Cerullo said he “reluctantly” voted in favor of the proposal, calling the decision a “land use Sophie’s choice.” He noted that a report prepared by City Planning, not yet publicly available, laid out a “roadmap to why it should be approved.” He acknowledged his previous criticism of the plan, saying that “the land use rationale was questionable at best,” and “the underlying motivation suspect.”

Still, Cereullo, a former City Council member, cited first-hand experience with ill-planned hotels in his community in Staten Island as helping to guide his vote.
Hotel developers and other real estate professionals have argued that the proposal will snuff out hotel construction at a time that the industry is struggling. A newly formed trade group filed a lawsuit this week calling the text amendment a giveaway to the Hotel Trades Council.

If, as expected, the text amendment is approved by the City Council and mayor, new and expanded hotel projects will have to go through the city’s Uniform Land Use Review Procedure. The lawsuit and other critics have argued that this will give the hotel union tremendous leverage to unionize new hotels or prevent them altogether.
Former and current City Planning officials have also raised concerns about the land-use purpose of restricting hotel development citywide. The New York Times reported that Laremont’s predecessor, Marisa Lago, wrote in an internal memo last year that the proposal “could be seen as contrary to economic recovery principles and sound planning.”

But the change has remained a priority for the de Blasio administration, which changed its strategy of incrementally requiring special permits for hotel construction in certain districts to implementing a citywide plan. The administration said the latter would help “support more predictable development and limit the extent to which a hotel use may impair the future use or development of the surrounding area.”

The Hotel Trades Council has been a prominent supporter of the mayor’s and of City Council Speaker Corey Johnson.
The push for special permits was triggered by a vast expansion over the past 20 years of nonunion hotels, especially in Manhattan and Brooklyn, which helped power — and was made possible by — a boom in tourism.

According to the city’s final environmental impact statement on the plan, the new hurdle is expected to result in 47,070 fewer hotel rooms than would otherwise exist by 2035. The city estimates that hotel supply would reach 127,660 rooms by then, versus 174,730 rooms if hotel development remained as-of-right in commercial districts.
I previously criticized NYC policies towards hotel development ad "putting out fires with gasoline."

Here we see how successful they were.
How special are these permits? No one got any

Hotel developers’ warnings prove true as year passes with zero approvals​

Developers forecast that restrictions on hotel development would have a chilling effect. Conditions, so far, are pretty icy.
In the 365 days since the city required special permits to build a hotel, not a single application for one has been filed.

While building permits have been sought and issued for new hotels, they appear to be for projects exempt from the law or grandfathered under the old rules, according to an analysis of Department of Buildings data by The Real Deal.
Hotel projects — which previously were allowed in commercial districts without having to jump through political hoops — abounded as city tourism boomed from the turn of the century until the pandemic.
Leading up to the law’s passage, proponents argued that a special permit would help avoid an oversaturation of hotels and prevent projects that would disrupt residential neighborhoods. Critics countered that the bill lacked any land use rationale, and would sap an industry already weakened by the pandemic.
Obtaining a special permit is no small task. It involves going through the city’s Uniform Land Use Review Procedure, or Ulurp, an expensive and months-long process that culminates in a City Council vote. Council members are subject to pressure from constituents and from the Hotel Trades Union, which lobbied for the permit requirement to curb the proliferation of nonunion hotels.
By the Department of City Planning’s own analysis, by 2035, the permit mandate will leave New York 47,000 hotel rooms short of the demand. While it is challenging to isolate the effects of the law from those of other economic conditions, hotel projects also dried up in light manufacturing zones after special permit restrictions were enacted there in 2018.

Attorney Eugene Travers of Kramer Levin said a few developers he represents are considering applying for a special permit to build hotels. But with projects now complicated by economic conditions such as rising construction costs and interest rates, the extra costs and time involved in getting a special permit are especially unappealing.
Even without the extra political approval and the threat of a recession, it can be difficult to secure financing for hotels.
“All things considered, it is currently more lucrative to explore investing and turning around a distressed asset, versus trying to reposition or develop one through the special permit process,” said Yariv Ben-Ari, co-chair of Herrick’s real estate hospitality group.
The permit requirement did make a winner of hotel projects that were underway when the law took effect or were otherwise exempted. They now have a few years, and potentially longer, without any new competition.
But the bigger winner was the Hotel Trades Council. Because City Council members now have the final say over a project, the politically influential union would push them to make approval conditional on the developer’s not opposing a union organizing drive.
An official from the union noted that unlike agreements that mandate that union labor is hired to construct a building, special permits do not guarantee that a hotel’s workforce will be unionized.
“That process takes weeks to mature after a project is completed and the union has gone through the process of educating, organizing, and winning worker approval to join the union,” the official said.
The union also pointed to the drop in tourism in the city, saying the market doesn’t currently support new hotel developments, regardless of special permit requirements. The union asserted that the special permit mandate will not deter projects once the market returns, and that it puts hotel development on an equal footing with land use actions that require Council approval.
“The appetite to go through Ulurp is certainly there for the right project,” another union official said.
However, no one is predicting a return to the scale of hotel development that predated the law. Many of those projects were by developers who avoid the political gauntlet that special permits entail.
The union has logged other lobbying victories. A 2021 measure to allow the conversion of hotels and office buildings into affordable housing grants the union veto power over such projects. Hotel Trades blocked conversion of the Paramount Hotel on West 46th Street, according to City Limits.
By the same token, plans for a union-staffed hotel would enjoy Hotel Trades’ support. But Travers said if special permit applications ever do move forward, the requirement could backfire on the union — and put politicians in a tough spot.
“The City Council may find themselves in a difficult position where they have a hotel where the unions support it but the community opposes it,” he said. “The stated rationale of the need for the special permit is that hotels sometimes conflict with surrounding residential neighborhoods.”
 

David Goldsmith

All Powerful Moderator
Staff member

Long-shuttered LaGuardia Courtyard Marriott sells for $53M​

Vacant since 2017, airport hotel is expected to be redeveloped by buyer Kenny Huang​

A LaGuardia Airport hotel that hasn’t welcomed a guest in five years has found a buyer.
The Connecticut-based Heyman family, longtime owners of the former Courtyard by Marriott LaGuardia Hotel at 90-10 Ditmars Boulevard, sold the 288-key property for $53 million, The Real Deal has learned.
The buyer is an individual named Kenny Huang, according to people familiar with the deal, who were unable to provide additional information.
Located directly across Grand Central Parkway from the airport, the hotel has been shut down since 2017, but ownership had kept up on regular maintenance of the property.
Sources say Huang is expected to redevelop the 189,000-square-foot building, although it is not immediately clear what his plans are. The 3.5-acre property is zoned for a conversion to residential, as well as mixed-use, assisted living, office, medical and educational facilities, according to the listing, which touts the hotel’s proximity to Laguardia and the airport’s ongoing, multi-billion-dollar renovation.
RIPCO Real Estate’s Stephen Preuss and Kevin Louie brokered the deal.
The Heyman family, through the entity GCP Realty II LLC, put the six-story hotel on the market last year, expecting offers in the mid-$60 million range.
Along with the shuttered hotel, the property includes 10,500 square feet of office that was once occupied by Avis Rental Cars and 323 parking spaces near the parkway entrance. The site was last sold in 1999 for an undisclosed amount, records show.
The sale comes a little over a year after the Heyman family won a years-long tax certiorari against the city, reducing the property’s assessed value by 85 percent from the fiscal years 2014-2015 through 2018-2019. The average assessed value in those four years was $24.2 million, but it was reduced to $3.6 million as a result of the lawsuit.
The vacant hotel is less than a mile from the 443-key New York LaGuardia Airport Marriott at 102-05 Ditmars Boulevard, which sold last year for $86.6 million along with an adjacent 1.5-acre development site that went for $17 million. The buyer, California-based private equity firm ASAP Holdings, plans to build housing and a community center on the site.
Huang’s deal for the Courtyard Marriott comes as New York City investment sales have plummeted amid high interest rates. Dealmakers traded $7.86 billion worth of commercial property in the third quarter, a 30 percent decline from the second quarter, according to a report by Ariel Property Advisors. The 568 deals, involving 701 individual properties, represented declines of 25 percent and 28 percent from the second quarter, respectively.
 

David Goldsmith

All Powerful Moderator
Staff member
Redefines "revolving debt."

Crowne Plaza Times Square Hotel owners file for bankruptcy​

Argent Ventures negotiating with Vornado on restructuring plan​

The owners of the recently reopened Crowne Plaza Hotel in Times Square filed for Chapter 11 bankruptcy protection Wednesday in an effort to resuscitate the ailing and lawsuit-plagued business.
Andrew Penson’s Argent Ventures wants to reorganize the finances of the hotel’s home, 1601 Broadway, having gained control of the 46-story tower in the heart of Times Square by vanquishing office giant SL Green in court and replacing Vornado Realty Trust.

Penson had elbowed his way into the marquee property by buying — at a steep discount — the mezzanine debt on which Vornado had defaulted.
The debt is $526 million on the 795-room hotel, 196,300 square feet of office space and 17,800 square feet of retail, according to bankruptcy filings. Almost all of that — $519 million — is owed to senior and mezzanine lenders. Some $418 million in senior debt has been delinquent since April 2020, according to bankruptcy filings.

The hotel, which occupies floors 15 through 46, closed the previous month when Covid arrived. It reopened last month. While tourism to New York City has rebounded substantially, the pandemic’s effects linger in the hospitality industry, which still employs fewer people than it did in 2019.
Some 88,000 square feet, or 45 percent, of the office space at 1601 Broadway remains vacant. The hotel paid $7.5 million in severance to laid-off hotel workers, plus another $5.2 million in severance — required by an 11th-hour de Blasio administration law — which Argent, Vornado and hotel operator Highgate Hotels agreed to divide evenly.

Besides the pandemic, Argent blamed the financial woes on a “burdensome” licensing agreement with InterContinental Hotels Group for use of its Crowne Plaza brand, and on a complex ownership structure. Until Argent took control of the property, there were three fee owners, one of which also owns the leasehold.

In its bankruptcy filing, Argent said “the operating costs associated with servicing meeting spaces and providing food and beverage exceeded the revenues from such activities.”
It added that “the complex ownership arrangements of the land underlying the premises (namely the Walber fee parcel and the Riese fee parcel) also created uncertainty and financial strain.”
The Walber family had sold its ownership stake to office landlord SL Green in August 2021 for $121 million, but a judge ruled that the sale violated Argent’s ownership right to the property. Argent then bought the Walber family’s portion of the property — an 11,000-square-foot parcel — for the same $121 million in May.

The legal battle with SL Green was “expensive, time consuming and made it difficult, if not impossible, to reopen the hotel,” the bankruptcy filing said.
Argent bought the final fee parcel beneath the hotel on Wednesday. Vornado, the ultimate equity owner of the property, did not immediately return a request for comment.
Office tenants at 1601 Broadway include the Association for Computing Machinery, American Management Association and Open Jar Studios, with monthly rent totaling about $500,000. Retail rents, including Krispy Kreme’s, total about $635,000 per month.
 

David Goldsmith

All Powerful Moderator
Staff member
NYC continues to be over hoteled yet still building thousands of new doors.

NYC hotels sell at bargain prices as market slowly recovers​

Per-room revenues nearly returned to 2019 levels last year, but occupancy has long way to go
New York City’s hotels enjoyed a much-needed comeback last year — those that survived the devastating effects of the pandemic, at least.

Although the city still has fewer hotel rooms than it did before Covid, those rooms generated about as much revenue last year as they did in 2019. The hospitality sector’s all-important metric of revenue per available room (or RevPAR) reached $215.16 in 2022, up 48 percent from 2021 to fall just short of the $218.75 figure recorded in 2019.
Occupancy, however, was at 74.8 percent last year — significantly higher than 2021, but still down more than 13 percent from 2019. That helped contribute to some serious bargains in the investment sales market.

The biggest hotel sale of 2022 dwarfed its nearest rivals, but was still a relative steal.

Host Hotels & Resorts unloaded the Sheraton New York Times Square to MCR Investors for $323 million — a humbling haircut for Host, which purchased the 51-story hotel for more than twice that, $738 million, in 2006.

None of the other hotel sales in Manhattan cracked nine figures. The runner-up was Sonesta International Hotels Corporation’s purchase of The Fifty Hotel at 155 East 50th Street for $99.8 million. But was part of a larger, $324.3 million deal for four hotels — each of which ranked among the year’s top 10 hotel sales.
 

David Goldsmith

All Powerful Moderator
Staff member

Distrikt Hotel, facing foreclosure, ordered to pay $46M debt​

Developer survived pandemic foreclosure, but this one could be curtains
The owners of a long-troubled Midtown hotel are on the verge of checking out.
A referee ordered the owners of the Distrikt Hotel to pay up after defaulting on a $40 million loan from U.S. Bank, the CMBS lender, court documents show.

Three individuals — Scott Schroeder, Victor Afonso and Kevin Fee — were named alongside ownership entity 342 Property LLC in court filings.
The Distrikt went into foreclosure in 2021 after shutting its doors throughout the pandemic. But the 32-story, 155-key hotel at 342 West 40th Street reopened when the court appointed a receiver in the case — though possibly too late for the owners to hang on to the Midtown property.

The Distrikt had stayed shut even as many hotels had reopened. Lawyers for U.S. Bank argued that the Midtown hotel could have started paying its debt had it started back up when the rest of the industry did.
Lawyers for Axonic Credit Opportunities Master Fund, a separate lender that became a third-party defendant, made a similar claim in the case.
“They really just wanted to throw in the keys,” said an attorney for Axonic, according to a court transcript. “They didn’t really want to reopen the hotel. They didn’t want to do anything that would potentially pay my client’s debt service.”

Axonic had made a $16 million mezzanine loan on the Distrikt.

The hotel had financial problems well before the pandemic. Soon after it opened in 2010, the ownership entity sued its lenders after they refused to grant an extension on its mortgage. The lenders noted the hotel failed to maintain the requisite debt service coverage ratio, meaning cash flow was too weak to reliably cover the debt payments.
Its revenues battered by competition, the Distrikt saw its coverage ratio fall throughout 2019, and when the pandemic struck in early 2020, things got worse. About a month into the pandemic, a $35 million loan on the hotel that had been securitized was sent to special servicing, the Commercial Observer reported.
With the latest court ruling, the star-crossed hotel again hangs by a thread.
Lawyers for U.S. Bank and the hotel owners did not respond to requests for comment.

 

David Goldsmith

All Powerful Moderator
Staff member
Gaw’s Standard High Line Hotel escapes $170M foreclosure
Four-star establishment missed loan payments during pandemic

An iconic hotel above the High Line has avoided the ax.
On Monday, Wells Fargo dropped a two-year-old, $170 million foreclosure suit against Hong Kong-based Gaw Capital Partners’ Standard High Line Hotel at 848 Washington Street.

The bank, acting on behalf of bondholders who own the loan, had on June 1 given Gaw until July to respond to legal filings as the parties negotiated a settlement, according to court documents.
It is unclear, however, how they plan to resolve the loan default.

The 338-key, four-star hotel, which sits on stilts above the popular tourist attraction, was purchased by Gaw in 2017 for $340 million with help from a $170 million acquisition loan from French investment bank Natixis. The loan, which was to be paid off over 10 years, would eventually be split into four promissory notes.
Things went awry when the pandemic shut down the hospitality industry. Gaw missed payments from May 2020 through October 2021, according to a federal lawsuit in which lenders claimed the private equity fund owed them nearly $187 million.

Behind the scenes, Gaw’s Standard High Line was one of 8,100 hotel businesses saved by federal coronavirus assistance, which handed U.S. hotels large sums through the Paycheck Protection Program. At Gaw’s High Line property, that saved 468 jobs.
The company, one of the largest real estate private equity firms in Asia, manages $33.6 billion in assets around the globe, according to Forbes.

Gaw Capital did not respond to a request for comment.
In a statement at the time the lawsuit was filed, a management consultant with Gaw Capital Hospitality disputed that the company had missed payments, asserting that “many” of the alleged missed payments were actually sitting in lender-controlled accounts while the controlling note holder, Apollo Global Management, declined to pursue settlement offers “at market terms.”
Rooms were available Wednesday at The Standard starting at $429, according to booking sites.

 

David Goldsmith

All Powerful Moderator
Staff member
El-Gamal asks judge to call off Margaritaville foreclosure
Developer claims Arden Group is trying to deter potential bidders

Sharif El-Gamal is calling a Hail Mary to try and save his Margaritaville Hotel.
The developer on Wednesday asked a judge to call off the UCC foreclosure auction for his 234-room Times Square hotel, which is scheduled to take place in a week and a half.

The head of Soho Properties argues that his lender, Craig Spencer’s Arden Group, rigged the auction process to scare off potential buyers for the property at 560 Seventh Avenue.
“[Arden’s] intent here is obvious,” El-Gamal’s attorneys wrote in a lawsuit filed Wednesday in Manhattan Supreme Court. “It hopes to seize control of the property and benefit from [El-Gamal’s] hard work.”

The developer’s attorneys argue that Arden’s foreclosure process is “commercially unreasonable” — a violation that can nullify an auction. El-Gamal’s team said Newmark, the brokerage handling the process, is having prospective bidders sign nondisclosure agreements that prevent them from communicating with the developer.
“It is typical and customary to have a borrower participate in an auction, as it can often be the best outcome for all stakeholders,” the attorneys wrote.
El-Gamal also claims Arden isn’t giving bidders enough time to evaluate the property.

Notice of the auction was posted April 10, but El-Gamal said information on the terms of the sale and bidding instructions were circulated more than two months later on June 23.

With the auction set for July 10 and the Fourth of July weekend coming up, he says 13 days is not enough time. Bidders are also required to put down a deposit of either $5 million or 5 percent of the maximum possible bid, without knowing what will happen to their deposit if the sale is adjourned.
A representative for Arden Group did not immediately respond to a request for comment.
El-Gamal defaulted on his $57 million mezzanine loan when he failed to make payments in March.
The developer claimed in his lawsuit that he was close to getting a term sheet to refinance the loan and asked Arden to postpone the auction to get it signed. He said the hotel was appraised in May and was valued between $266 million and $350 million.

 

David Goldsmith

All Powerful Moderator
Staff member
And this is supposed to be an "it" hotel. I was there this weekend and the guest I was seeing complained there was no minibar, It took the front desk way too long on hold, and the elevator I wrote up in was dirty.

Witkoff, Schrager face foreclosure at Public Hotel​

Värde Partners aim to force sale of boutique, debt-plagued hotel

Steve Witkoff and Ian Schrager appeared to have gotten a handle on the debt at their Public Hotel after falling behind on their mortgage. But financial trouble at the Lower East Side property has persisted, and now it may cost the developers their investment.
Witkoff and Schrager are facing a UCC foreclosure on their equity in the 367-room hotel at 215 Chrystie Street. The partners owe more than $86 million in mezzanine debt, according to a notice for the public auction, which is being handled by Matthew Mannion at Mannion Auctions.

The sale is scheduled for Sept. 12.
The mezzanine lender is the credit-investment firm Värde Partners, sources told The Real Deal. The details of how and when the Minneapolis-based company acquired the debt are unclear.
Witkoff and Schrager previously had a $60 million mezzanine loan from Korean lender Shinhan Investment Corp., which tried to sell the debt in 2020. It’s not clear when Värde purchased the loan, but the LLC that it used to buy the debt was created in October.
Representatives for Witkoff, Schrager and Värde Partners did not immediately respond to requests for comment.

Witkoff and Schrager opened the 28-story building — which includes 11 luxury condos on top of the hotel — in 2017, but were forced to close it when the pandemic hit. The hotel reopened in the summer of 2021 with a star-studded bash, but by the next year the developers had defaulted on their $189 million senior mortgage.
It appears they were able to get current on the loan when Madison Realty Capital and Newbond Holdings bought the debt late last year from Deutsche Bank and Aareal Bank.

The hotel industry has taken large steps forward since the pandemic but distress is rippling through the sector.
In San Francisco, Park Hotels & Resorts last month said it would stop making payments on the $725 million CMBS loan backing the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco.
In New York, Sharif El-Gamal is fighting to hold onto his Margaritaville hotel in Times Square.

 

David Goldsmith

All Powerful Moderator
Staff member

Lenders file to foreclose on 20 Times Square hotel​

Maefield Development failed to repay $750M loan by maturity date

The tangled knot of debt around one of the biggest disasters in New York real estate history is one step closer to getting cut.
A foreclosure lawsuit accuses Maefield Development and its CEO Mark Siffin of failing to repay a $750 million loan on 20 Times Square. The financing was securitized in a single-borrower commercial mortgage bond.

Wilmington Trust, the trustee acting on bondholders’ behalf, filed the suit Monday in state court.
It cited five different events of default, including failure to repay the loan by its May 5 maturity date.

Neither Maefield nor Gary Mennitt, a lawyer for the plaintiffs, responded to a request for comment.
The suit is the most dramatic development yet in what’s been a train wreck at the crossroads of the world.
Developer Steve Witkoff purchased the parcel at 701 Seventh Avenue in 2012 and demolished an 11-story office building on the site with the intent of developing a 42-story luxury hotel that would also include retail space. The project broke ground in 2015.

In 2018, Maefield and Fortress Investment Group took control of the project by buying out the development’s other investors with loans provided by French bank Natixis. Those deals valued the development at $1.6 billion.

Natixis kept $650 million of that debt on its balance sheet — with the leasehold serving as collateral — while the rest was securitized in one single-borrower CMBS and four other conduit deals.
But after taking full ownership, Maefield and Fortress ran into trouble. Their partnership set up a dynamic at 20 Times Square where it owned both the leasehold and the fee position, making it the tenant and the landlord, a conflict of interest that resulted in Maefield and Fortress paying rent to itself.

The Marriott-branded Edition hotel opened in the building in March 2019. Just months later, the conduit loans were quietly passed to a special servicer. While the hotel had a strong opening, it was shut down after a year because of the pandemic.
At the same time, the company struggled to lease the 76,000 square feet of retail space. Hershey’s opened a store in the building but took just 7,500 square feet. A joint venture between the National Football League and Cirque du Soleil took 50,000 square feet, but the business closed within a year.

The setbacks put Maefield in the red on its myriad of loans. It defaulted on the $650 million leasehold loan that Natixis kept. The lender bought the leasehold at auction and handed management over to SL Green, ending Maefield’s owner/tenant relationship. However, sources told The Real Deal last year that the leasehold is “virtually worthless.”

 

David Goldsmith

All Powerful Moderator
Staff member

Zelig Weiss wants out of William Vale​

Brooklyn dealmaker, after long battle for control of property, plans Halloween exit

After years of battling his partner, Zelig Weiss says he wants out of his lease at the William Vale Hotel.
Weiss said he is vacating his deal at the William Vale, according to a filing in bankruptcy court. Weiss operated the hotel through a lease with New York developer Yoel Goldman’s former company, All Year Holdings.

Weiss will no longer be the hotel operator on Oct. 31, according to the court filing.
But Weiss is not leaving the picture. He still has an equity stake in property, which an All Year entity is attempting to sell to pay off the hotel’s creditors. Proceeds from the sale could go to Weiss once the creditors are paid.

Herrick’s Stephen Selbst, an attorney for the All Year entity, said it will appoint a new management company to oversee the hotel’s day-to-day operations. All employees and leases with tenants will remain in place as the owners plan to market the property for sale.
Weiss’ exit comes as a shock to anyone watching the long legal battle over the William Vale. Weiss developed the swanky hotel with Goldman, but the two South Williamsburg-based builders have been at war for years over their properties.
Meanwhile, Weiss has made numerous attempts to buy the hotel and attempted to block an effort to sell it to another buyer.
Goldman’s dispute with Weiss goes back about seven years. Goldman first sued Weiss in 2016, claiming Weiss attempted to squeeze him out of some of their Brooklyn investments.
The pair reached a settlement later that year. But issues got worse at the William Vale. Goldman asked Weiss, who operated the hotel, for more insight into the establishment’s finances, and claimed Weiss never held up his end of the settlement.

In early 2019, the two signed a shtar — an agreement to enter arbitration before a rabbinical court. The process dragged on for months, but the two still bickered.

“I can’t be your partner like this,” Goldman texted Weiss in August 2019, “not to be able to know what’s the balance in the accounts.”
Weiss texted back, “I don’t understand, you make me feel like a thief, you have all P&L’s you can figure it all out yourself.”
The arbitration required Weiss to give Goldman monthly copies of the hotel’s bank statements. Weiss sued in secular court to have the ruling voided. His lawyer argued that one of the arbitrators had been suspended from practicing law because of a felony conviction. A New York state judge ruled in Weiss’s favor.

Goldman started running into issues once the pandemic hit. Lenders initiated foreclosures across his portfolio and the company missed payments to its Israeli bondholders, leading restructuring officers to take over his company and put it into bankruptcy.
This year, All Year exited bankruptcy by selling off most of its portfolio to a group led by healthcare investor Avi Philipson. The sale did not include the William Vale.
Weiss attempted to buy the hotel multiple times but was never able to close a deal with All Year’s restructuring officers. Weiss was still in talks with All Year’s lawyers in recent months to buy the complex, according to court filings.
Weiss was also sued by an All Year entity, which alleged he diverted money from the hotel despite reaping $7 million in PPP money.
The saga is not over. As the property heads for sale, Weiss could come back and make another bid on the property.

 

David Goldsmith

All Powerful Moderator
Staff member

William Vale hotel heads for sale​

All Year entity looks to tap Eastdil and A&G to sell the trophy asset

The highly coveted William Vale hotel is about to hit the market.
Brooklyn developer Zelig Weiss vacated his lease at the hotel complex on Tuesday. Weiss operated the hotel through a lease with developer Yoel Goldman’s former company, All Year Holdings.

Attorneys for an All Year entity are now seeking to sell the hotel to pay back its creditors, including Israeli bondholders who hold the debt. The attorneys are seeking to appoint Eastdil Secured and A&G Real Estate Partners as the brokers. Eastdil and A&G were also used to market the nearby Williamsburg Hotel.
Weiss did not respond to a request for comment. Eastdil and A&G also did not respond to a request for comment.

Recent filings in bankruptcy court reveal how much the brokers could take home if they can close the deal.
The fee would be 0.75 percent for a sales price of up to $160 million, plus an additional two percent for anything above $160 million, three percent above $170 million and four percent beyond $180. The fees could be reduced if Weiss, Electra Real Estate or Blackstone enters into an agreement to acquire the property, according to court filings.
Weiss, Goldman and All Year have been engulfed in a years-long legal battle over the control of the hotel. In late September, Weiss suddenly decided he wanted out of his lease and would hand over management responsibilities to All Year.

Weiss still has an ownership stake in the property. Proceeds from the sale could go to Weiss after the creditors are paid.

Once the property goes up for sale, Weiss also has the option to bid. This time, he can acquire the hotel without Goldman, his former partner turned enemy.
The partnership between the two former heavyweights in Brooklyn real estate started to unravel around 2016 after Goldman alleged Weiss attempted to push him out of some of their investments. The two also went at it over the William Vale with Goldman alleging that Weiss failed to hand over the hotel’s finances.

Goldman’s empire ran into financial issues around 2020. Lenders initiated foreclosures and restructuring officers eventually took over and put it into bankruptcy. This year, All Year sold off most of its portfolio to healthcare investor Avi Philipson. The William Vale was excluded from the sale.
During the bankruptcy process, Weiss attempted to acquire the hotel multiple times, including in recent months. All Year also sued Weiss, alleging he diverted hotel revenues, which should have been used to pay rent under the lease. That litigation is still pending in federal court.

Weiss and Goldman are also still entangled in litigation in state court, but the dispute moved to arbitration.

 

David Goldsmith

All Powerful Moderator
Staff member

Royalton Park Avenue Hotel partners in danger of default​

Highgate, BGO bought NoMad property for $200M in 2017

Highgate Hotels and BentallGreenOak avoided defaulting on the Royalton Park Avenue Hotel once during the pandemic, but now, a second wave of distress is rolling their way.
Last week, Moody’s downgraded a security holding the mortgage at 420 Park Avenue South in NoMad to deep junk status, Crain’s reported. The ratings agency stated there was a “high default probability” for the 249-key hotel.

The loan was securitized in 2012, five years before the current owners bought the property. Since then, “cash flow has generally declined annually,” according to Moody’s, pointing to lower revenue and increased operating expenses.
For the 12 months ending June 30, the hotel generated only $4.2 million guest-related income. In calendar 2022, guest-related income was slightly better at $4.7 million. But the owners have been unable to cover payments on a $124 million mortgage since 2020.

Two years ago, ownership of the property neared default after falling behind on its mortgage and having the loan transferred to special servicing, according to Crain’s. That year, the hotel’s mortgage was converted to an interest-only loan; Highgate and BGO contributed $7.5 million to cover operating expenses.
Ownership, which didn’t comment to Crain’s, aims to modify the loan again. It’s set to mature in June.

In 2017, GreenOak Real Estate — before it morphed into BGO — and Highgate purchased the Gansevoort Park Avenue NYC hotel in an off-market deal from Gansevoort Hotel Group, Centurion Realty and Douglaston Development for roughly $200 million. The deal came out to roughly $800,000 per key.
The hotel closed for 18 months during the pandemic, reopening in September 2021.

If the hotel can stay afloat, its owners can benefit from some of the forces shifting in favor of the hospitality market. Hotel owners are experiencing a surge in revenue as tourism comes back to life in New York City, and they stand to reap further gains as Airbnb virtually disappears from the Big Apple.
 

David Goldsmith

All Powerful Moderator
Staff member

Schrager, Witkoff have plan to save Public hotel from foreclosure​

But EB-5 fund sues, saying debt-for-equity swap will water down its stake

Ian Schrager and Steve Witkoff have a plan to avoid foreclosure at the Public on the Lower East Side. But one of the luxury hotel’s investors, worried about the impact on its stake, is suing to block the deal.
Schrager and Witkoff are working with their lender Varde Partners to convert some of the 367-room hotel’s $90 million distressed debt into equity, according to a lawsuit filed by one of the property’s investors.

A November email indicates that the developers planned to swap up to $30 million of Varde’s debt into equity, giving the Minneapolis-based investment manager a 45 percent stake in the property.
But the New York City Regional Center, an EB-5 manager that raised nearly $80 million from for the project, says the developers have left the investors “flying in the dark” because they refuse to share details.

The center filed a lawsuit last week claiming that Schrager and Witkoff need its approval to negotiate any deal. The fund manager said it’s not clear exactly how the equity would fit into the capital stack, but fears that Schrager and Witkoff would dilute its position.
“A glance at the JV’s organizational chart and the maze of joint ventures therein demonstrates that defendants have a consistent practice of introducing equity interests in the JV and the Public hotel through the creation of joint ventures,” the lawsuit claims.

Representatives for Schrager, Witkoff and Varde did not immediately respond to requests for comment.
The partners developed the 26-story building at 215 Chrystie Street, which also includes 11 condominium units, and upon completion in 2017 refinanced it with a $177 million loan from Deutsche Bank and Aareal Bank and a $60 million mezzanine loan from Korean lender Shinhan Investment Corporation.

Varde later acquired the mezzanine loan and last year started a UCC foreclosure.

This is not the first time the EB-5 fund has butted heads with Schrager, who co-founded Studio 54 as a junior lawyer in 1974, and Witkoff.
The fund had sued the high-profile developers in 2021, claiming they siphoned money from the hotel. The judge dismissed the case in July. The fund in August filed notice that it planned to appeal the decision, but has not filed paperwork to do so.

 
Top