"Last straw" for NYC hotel industry?

David Goldsmith

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I think NYC is over hotelled and we're going to see tons of new rooms opening. Converting some to other uses may be the only way to go.

Lawmakers race to allow commercial-to-resi conversions​

Legislators say measure is “priority” before session ends in June​

The state Senate is taking another shot at making it easier to convert distressed hotels and office buildings into affordable housing.
Lawmakers have amended a bill that would enable the state’s housing regulator to transform distressed hotels and office buildings into permanently affordable housing, which would then be managed by nonprofits. Such conversions were initially contemplated as part of the state budget, but the Gov. Andrew Cuomo’s proposal was panned by elected officials and housing advocates for overriding local zoning rules and not creating enough affordable housing.

Now, with 10 days left in the legislative session, lawmakers are racing to enact a new measure, dubbed the Housing Our Neighbors with Dignity Program. Senate Deputy Majority Leader Michael Gianaris, the bill’s sponsor, said in a statement that it’s a “top priority.” He pointed to the fact that the state’s budget included $100 million for conversions of distressed commercial properties.

“We included a down payment on this program in the state budget, and now we need to get it up and running,” he said.
Though a matching Assembly version is not yet publicly available, Assembly member Karines Reyes said revisions to that chamber’s measure have already been submitted.
The latest version of the bill applies statewide, not just in New York City. It also incorporates similar provisions from a separate bill introduced by Sen. Brian Kavanagh — namely, a possible shortcut for hotel conversions in the city. Hotels could get dual certificates of occupancy for permanent residency if the Department of Housing Preservation and Development approves, provided the hotel is within at least 400 feet of a residential district, but not located in an industrial business zone. (Kavanagh’s bill set a 800-foot requirement).

Kavanagh said he is “optimistic” that the bill will pass before the end of the session but noted that “it is not a done deal at this point.”
The revised bill still requires that 50 percent of all converted properties be set aside for residents who experienced homelessness immediately before moving into the new buildings. Such properties must be dedicated to residents making between 50 percent and 80 percent of the area median income, and the apartments would be rent-stabilized.

While the original bill also stipulated that nonprofits would own and manage these properties, the latest iteration of the measure puts a greater emphasis on social housing. The bill lists community land trusts as one of three mechanisms that can be used to ensure permanent affordability of apartments. Typically, under such a model, a nonprofit controls a property through a renewable 99-year ground lease, and rents out apartments solely to low- to moderate-income tenants or puts in place resale restrictions on homeowners.

The bill also creates a “social housing conversion fund” for grants, gifts, bequests or loan authority to finance the Housing our Neighbors with Dignity Program.
Rachel Fee, executive director of the New York Housing Conference, said there is an “urgent need” for allowing thesing conversions as part of the state’s recovery, as hotels and offices continue to struggle with high vacancy rates. She said her organization is hopeful that some funding from the proposed $2 trillion federal infrastructure bill could be dedicated to the program. She said NYHC also sees financing opportunities through the National Housing Trust Fund.


David Goldsmith

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Merchants Hospitality sells dormant LIC hotel for $38M​

Lender Taconic Capital acquired the property​

The owner of a former 100-key hotel is handing over another key — to the building itself.
Merchants Hospitality sold the building at 11-01 43rd Avenue in Long Island City to a creditor, Taconic Capital, for roughly $38.4 million. Crain’s first reported the sale.
Merchants paid $32.25 million for the property in 2018. Taconic refinanced $30 million of debt on the building in 2019, adding an $8 million loan on top of that amount.

Neither Merchants nor Taconic returned requests for comment.
The building was previously home to the Z NYC Hotel, which closed last summer. Hospitality startup Sonder had agreed to lease the entire 100-room property before the pandemic, but ended up walking away from its lease. Last August, Merchants filed a lawsuit against Sonder for $2.5 million, alleging its tenant breached the lease agreement. The suit is ongoing.

While many hotels have closed due to the pandemic, fewer than expected have sold for reasons of financial distress, thanks in part to low interest rates keeping debt markets alive.
Among those that have sold include the 600-room Watson Hotel at 440 West 57th Street, which Isaac Hera’s Yellowstone Real Estate Investments acquired for $175 million.

David Goldsmith

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Fortress files to foreclose on Toby Moskovits’ Bushwick hotel site​

LLC behind planned 155-unit hotel declared bankruptcy last summer​

Eleven months after it filed for bankruptcy, changes are afoot at an inactive Bushwick hotel development site owned by Toby Moskovits’ Heritage Equity Partners.
Fortress Investment Group has filed to foreclose on the property at 232 Seigel Street, in conjunction with a court order allowing Heritage to pay off the mezzanine debt, PincusCo reported.

“The COVID-19 Emergency Protect Our Small Businesses Act of 2021 is not applicable to this matter,” Fortress notes in its complaint, “since the subject property is vacant and unimproved, and was intended to be used exclusively as an approximately 155 room hotel with amenities, community space and parking.”

The $5.25 million senior loan is guaranteed by Moskovits, Michael Lichtenstein and Moshe Dov Schweid. According to the complaint, the total amount owed now comes out to $8.2 million with interest and penalties.

The Seigel Street property is part of Heritage’s Bushwick Generator development, which also includes creative and tech offices at 215 Moore Street. The complex has been the subject of numerous legal disputes between Moskovits’ firm and lenders, whom Moskovits accuses of predatory lending practices.

Last summer, a judge allowed the appointment of a receiver for the Moore Street property. The Seigel Street property filed for Chapter 11 bankruptcy protection a month later after a prospective buyer failed to close due to the pandemic, according to PincusCo. Elsewhere in Brooklyn, Moskovits’ Williamsburg Hotel filed for bankruptcy in February.


David Goldsmith

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NYC Hotel Industry in a ‘Depression,' Room Revenue Down 60%, Report Says​

An industry trade group says New York City has lost a third of its hotel rooms, and average revenue in the rest is down more than $150 a room​

The American Hotel & Lodging Association said the city has lost about a third of its hotel rooms since the pandemic. For those that are left, revenue per available room was $95 in May -- down 62 percent from May 2019.

That's a deep enough drop to put the city's hotel industry in the "depression" category, the association said.

David Goldsmith

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About 41% of the city’s hotels are still closed, according to the Hotel Association of New York City. And at the hotels that are open, amenities such as on-site restaurants and lounges are not fully operational.

David Goldsmith

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This should result in some interesting litigation.

NYC City Council passes bill forcing hotels to dish out severance pay​

Hotel industry pushed back on potential new legislation​

The City Council voted Thursday to pass a bill compelling hotel owners to provide severance pay to their out-of-work employees.
The bill, introduced by Council member Francisco Moya, requires hotels that either closed entirely or laid off 75 percent of their staff during the pandemic to provide severance to service employees for up to 30 weeks. Hotels can exempt themselves from the mandate by recalling at least 25 percent of employees by Oct. 11 and reopening by Nov. 1.

“This legislation is about protecting the livelihoods of these very workers, who are the backbone of NYC’s tourism economy, and incentivizing the revitalization of NYC’s hotel industry by getting workers back to work,” said Moya, who represents District 21 in Queens.
Under the legislation, employees eligible for severance pay would be owed $500 per week, for up to 30 weeks.

The Hotel Trades Council is among the bill’s backers. The union representing the city’s hospitality workers estimates nearly 60 percent of hotel employees — or about 30,000 people — are out of work.
The Real Estate Board of New York testified against the legislation, claiming severance payments would be an additional burden on struggling hotels.

In December 2020, hotel occupancy in the city was 36 percent, with the average daily rate at $130. The figures illustrate a sharp decline compared to December 2019’s 91 percent occupancy and average rate of $351, REBNY said, citing NYC & Company data.
“These businesses, which may have not earned meaningful revenue for well over a year, may simply not be equipped to do so,” REBNY said in its testimony.

Vijay Dandapani, president of the Hotel Association of New York City, similarly dismissed the legislation as “not a sustainable proposition.”
“Many City Council members are unaware of the extent of pain the hotel industry has,” Dandapani said.
Despite some travel and tourism reemerging in the wake of Covid vaccinations and relaxed lockdown measures, an April study by CBRE said New York’s hotel industry won’t recover to pre-pandemic levels until 2025.

David Goldsmith

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Business-Travel Slump Undercuts Hotels as Vacation Season Ends​

Hotels see some recent momentum in corporate travel and look to foreign tourists’ return​

City hotel managers hope to get a boost from more leisure travelers visiting cities that have started easing restrictions.​

U.S. hotel owners are bracing for another quarter of sluggish business travel, hoping that this year’s surge in leisure travel can carry over into the fall and holiday season.
Overall, the strength of leisure travel looks unlikely to offset the falloff in corporate business and group travel this year. Hotel data and analytics firm STR is projecting that about 1 billion U.S. hotel rooms will be booked this year, up from 829 million in 2020, but still below the record year of 2019, when guests booked 1.3 billion rooms.
Hotel business-travel revenue for the year is expected to fall more than $59 billion compared with 2019, according to a report released last month by the American Hotel & Lodging Association.

That is even a greater drop than 2020, when nearly $49 billion in revenue was lost, the report said. “We’re on a downward slope for the end of the year,” said Chip Rogers, the association’s chief executive.

Hotel owners in the spring pinned their hopes on the rise in vaccination rates to boost corporate travel and large group events. That hope was squashed by the Delta variant, which led organizations such as the National Association of Broadcasters to cancel its trade show in Las Vegas and for organizers of the New York International Auto Show to call off the event scheduled for late summer.

Analysts say that companies are concerned that if they send employees to events they might be legally liable if a convention turns into a super-spreader event. “It comes down to liability,” said Mr. Rogers.
Hotels that depend on business travelers say advanced bookings are far lower than usual and typically are made just a few days before arrival dates, which is especially tough these days because many hotels also are suffering staff shortages.
The late advanced bookings are “dreadful when it comes to events,” said Sandi Robinson, director of sales for the Godfrey Hotel Chicago, a 221-room boutique lodging that got most of its business from business travel until the pandemic. “We end up having to turn down some events because we’re too short-staffed.”

Still, there are recent signs that business travel is slowly gaining momentum. Group demand, which is a mix of business and leisure, grew 5.7% between the final two full weeks in September, according to STR. Average daily rates for that business increased $16 to $214 to set a pandemic record for group rates. That was also the highest the average daily rate has been for groups since February 2020, STR said.
Now that peak vacation season has passed, hotel owners can’t count on the same level of leisure travel as in the summer, when hotel average daily room rates regularly exceeded their levels during the same period in 2019, said James Sullivan, head of real-estate research at institutional brokerage firm BTIG LLC.

But hotel owners in large cities like New York and Los Angeles, which suffered from a lack of foreign visitors during the pandemic, are banking on the return of overseas travelers during the holidays, analysts and industry executives say. The Biden administration lifted restrictions on foreigners who are fully vaccinated starting in November.
Hilton Worldwide Holdings Inc. on Monday reopened its 1,878-room property in Midtown Manhattan, which had been closed for most of the pandemic. Hilton had been planning to reopen last summer but decided to delay partly because of the spike in Covid-19 cases.


What do you expect your business travel to be like in the foreseeable future? Join the conversation below.
Hilton opted for an early October reopening partly because of the expected increase in international travel, and several event and group bookings this fall, according to Diarmuid Dwyer, general manager of the New York Hilton Midtown. The decline of the Covid-19 infection rate has had “a direct impact on the critical factors that drove our reopening timetable,” he said.
Meanwhile, Americans that put off family gatherings last year are unlikely to do so again, especially if they went on vacations earlier this year and are used to traveling during the pandemic, analysts say.

“Wedding season is in full swing,” said Jan Freitag, national director of hospitality analytics at CoStar Group Inc.
Downtown hotel managers also hope to get a boost from more leisure travelers visiting cities that have started easing restrictions on events and indoor gatherings for people who have been vaccinated.
“You have Broadway coming back, the New York City Marathon, and the mayor and governor have confirmed the Thanksgiving Parade will happen,” said Kori Yoran, general manager of the Margaritaville Resort Times Square, a 234-room hotel that opened in July.

David Goldsmith

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Staff member
Putting out fires with gasoline. NYC was over-hoteled before the pandemic.

New York Travel Is Down. Plenty of Hotels Are Opening Anyway.​

Despite construction delays and delayed openings from the pandemic, dozens of hotels are on track to open soon​

New hotels in New York City are starting to open with the summer travel season fast approaching, testing a market that has been recovering but still faces serious challenges from Covid-19.
Data firm STR is projecting that 78 hotels with more than 13,000 rooms combined will open in 2021, the largest year for deliveries in recent memory. While many suffered construction delays during the pandemic and might hold back on their openings, dozens of others are still on track to open this year or early next year.
Arlo Hotels is planning to open an upscale hotel near Hudson Yards this spring, which with 489 rooms will be one of the largest lodging properties scheduled to open this year. Properties already opened this year include the 74-room Brooklyn Vybe Hotel and 33-room Baltic Hotel, both in Brooklyn, and the 114-room ModernHaus SoHo in what used to be the James Hotel.

“New York was, is and always will be in the forefront of developers’ minds,” said Jan Freitag, national director of hospitality analytics at CoStar Group Inc.
Even in the best of times, launching a new hotel in the largest U.S. lodging market can be fraught. At the start of 2020, New York City’s 138,000 hotel rooms oversupplied the market, and it was starting to pressure room rates. Hotel labor costs are also among the highest in the country.

But those issues now look relatively minor after Covid-19’s devastating effect on tourism and travel. Hotel-room occupancy for New York was 53.8% for the week ended May 1, according to STR. That was up slightly compared with the previous week, but trails the national average of 57.1% and is well below the city’s 89.8% rate for that week in 2019, STR said.
Staff has been hard to recruit, in part because new hotels are competing with scores that closed during the pandemic and are now reopening. About 146 properties with 27,998 rooms have reopened, according to STR. Another 115 with 36,830 rooms are temporarily closed, while six have closed permanently.
New York City, like other major markets, has seen some improvement on the leisure-travel side as the vaccine rollout continues. But corporate travel and group business remain subdued and could remain so for much of the year, analysts say.

Less than 37 million tourists are expected to visit the city this year, compared with a record 66.6 million in 2019, according to NYC & Co., the city’s official tourism organization.

That makes opening a hotel in this environment a challenge, and a property could fall well short of the revenue needed to pay for enormous ramp-up and operating costs. The New York Hilton, one of the city’s largest hotels with more than 1,900 rooms, for one has no immediate plans to reopen, a spokeswoman said.
Opening too late runs the risk of many guests developing loyalty with competitors once the market springs back.
“That is the magic balancing act,” said Alex Ohebshalom, developer of the Fifth Avenue Hotel, a 153-room luxury development that completed exterior construction earlier this year but is holding off opening, perhaps until the fall, when Broadway theaters are scheduled to reopen.

The new Fifth Avenue Hotel in Midtown Manhattan, which is expected to open later this year.

New employees need to be trained in Covid-19 protocols, such as how to handle guests reluctant to wear masks. The Mandarin Oriental at Central Park reopened in early April. Its staff hands unmasked guests an envelope with the hotel logo and “We Care” on the outside and a mask on the inside. “It’s worked every time,” said Susanne Hatje, general manager.

Managers of the Arlo said that guests can opt to reuse the same sheets, so housekeepers will stay out of their rooms. That has been a preference of many guests at the chain’s other hotels during the pandemic. “We have lived with this,” said Oleg Pavlov, Arlo chief executive of Quadrum Global, the developer of the Arlo chain.

New York’s hotel market enjoyed strong demand and rising rates during the second half of the past decade. But it was showing signs of weakness, partly because of oversupply, in the year leading up to the pandemic. In early 2020, mortgage defaults by New York hotel owners were on the rise, and average daily rates were well off peak levels.
The pandemic delayed the reckoning the market was facing with the thousands of rooms under development, according to hotel owners and analysts. Projects like the Six Senses New York, the first North American property of a Thailand-based ultraluxury hotel brand, suffered construction delays. The company now expects to open in New York in 2022.
“We’re glad we didn’t open into the heart of the pandemic,” said Neil Jacobs, Six Senses chief executive. “On the other hand, the bills still need to be paid and the debt needs to be serviced.”

Startups, governments and nonprofits are racing to create so-called “vaccine passports,” or digital health passes aimed at helping people travel and safely move around in public. WSJ explains what it would take to get a global digital health pass system off the ground.
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.

David Goldsmith

All Powerful Moderator
Staff member

Lender seeks foreclosure on Standard High Line, alleging $187M owed​

Claiming 18 months of missed payments, Wells Fargo moves to wipe out Gaw Capital’s interest in Meatpacking hotel​

After a year and a half of missed loan payments, the Standard High Line could be headed to foreclosure.
Wells Fargo is suing an affiliate of owner Gaw Capital on behalf of CMBS bond holders, seeking a judgment of foreclosure and sale on the private equity firm’s interest in the 338-key hotel at 848 Washington Street in the Meatpacking District.

The lawsuit, filed Monday in federal court, alleges that Gaw owes its lenders nearly $187 million.
After acquiring the hotel for a reported $340 million in 2017, Gaw Capital secured a 10-year, $170 million acquisition loan from French investment bank Natixis. That loan was later split into four separate promissory notes, according to the suit.
Gaw was set to pay off the loan beginning in December 2017 and continuing through October 2027. However, from May 2020 through October of this year, Gaw failed to make any payments, the lawsuit alleges.
Gaw received a notice of default in June 2020, but still failed to pay, according to the suit. A year later, the lenders notified Gaw that the entire outstanding principal balance of the loan, along with all accrued interest and late charges, had been declared immediately due under the agreement’s acceleration clause.
The Standard High Line was one of 8,100 hotel businesses across the country that received federal coronavirus assistance of $150,000 or more through the Paycheck Protection Program in July 2020.
The four-star hotel was developed in 2009 by hotelier Andre Balazs in partnership with Dune Real Estate Partners and Greenfield Partners. It was quietly placed on and off the market in 2017 before it was bought by Gaw.
Based in Hong Kong, Gaw Capital is run by Goodwin Gaw. The private equity fund manages more than $27 billion in global property investments, according to Forbes.
Neither Gaw Capital nor Wells Fargo responded to requests for comment.

David Goldsmith

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Hotel development blocker now one step from de Blasio’s desk​

Mandate for special permits clears City Council committee​

A proposal to further restrict hotel development in the city is on the cusp of final approval.
The City Council’s Committee on Land Use on Monday voted for a zoning text amendment that will require developers to obtain a special permit before building a hotel or expanding an existing one by 20 percent or more. A few modifications were made, so it will need to be reviewed by the City Planning Commission before heading to a full City Council vote.

The text amendment has been criticized by real estate attorneys and developers, who argue that it has no valid land use rationale. Opponents have pointed to Mayor Bill de Blasio’s relationship with the Hotel Trades Council as an impetus for the policy. A lawsuit filed in October claims the text amendment is a giveaway to the union.
Council members are not inclined to wait for the litigation to be resolved because most of them must leave office at year-end, as must de Blasio.

For its part, the administration has said the text amendment is aimed at supporting “more predictable development” and limiting “the extent to which a hotel use may impair the future use or development of the surrounding area.” The proposal does exempt some hotels, including those that were planned prior to the text amendment’s approval and are ready for occupancy within six years, as well as those that will shelter homeless individuals.

The Committee on Land Use also signed off on an exemption for certain hotels in the Midtown East theater subdistrict.
The city has already made special permits mandatory in a few areas, including Midtown East, the Garment District and light manufacturing zones. City Hall scrapped a similar proposal for Union Square in favor of pursuing the citywide version.

The text amendment is one of the de Blasio administration’s final land use priorities, along with rezoning Gowanus and Soho. The proposals are expected to pass before the end of the year.

David Goldsmith

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NYC hotels hoping for holiday business swell likely to be disappointed

CBRE projecting 56 percent occupancy in fourth quarter​

New York City hotel operators are going to be feeling like Ebenezer Scrooge this holiday season if reported occupancy expectations hold up.
CBRE Group’s hotel division forecast occupancy in the city to hit 56 percent during the fourth quarter, according to the Wall Street Journal. That’s only a slight increase from the third quarter and a disappointment compared to the historical lift in occupancy rates during the holidays.

“We’re going to get some visitation over the holidays but I don’t think this is a cure-all in any way,” said CBRE’s head of hotels research and data analytics, Rachael Rothman.

Not all hotel operators in the city are feeling as glum about the holiday season. Shannon Knapp, president of Leading Hotels of the World, told The Journal that occupancy and average-daily room rate at the Knickerbocker in Times Square are close to 2019 levels.
Despite some signs of hope, the pandemic has left this holiday season on shaky ground after dashing tourism — and the dollars that typically come with it. As of Nov. 15, international flight bookings to the city for the month were down 45 percent from 2019 levels, according to data from ForwardKeys reported by the Journal.

Additionally, tourists from specific countries may have a harder time making the trip at all. Requirements that Chinese citizens quarantine upon returning from overseas may potentially dissuade some from traveling.

New York City’s hotel industry has seen some life in recent weeks on the heels of a bill requiring shuttered hotels to reopen by Nov. 1 or pay severance to out-of-work employees.
The Omni Berkshire Place, Grand Hyatt near Grand Central, Hilton Midtown on Sixth Avenue and Martinique Hotel announced plans to begin reopening in the coming weeks.

“Our strategy was to lose less, so what do we do?” Peter Strebel, president of Dallas-based Omni Hotels & Resorts, told Crain’s last month. “Paying the severance would have cost more than reopening.”
The forecast for recovery among the city’s hotels remains cloudy. In April, a CBRE study predicted New York City hotels wouldn’t recover to 2019 occupancy levels until 2025.

David Goldsmith

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Midtown DoubleTree sells at staggering loss​

Hawkins Way Capital paid RLJ Lodging Trust $146M​

In the wake of the pandemic, New York City hotels have seen their fair share of massive discounts — and a newly recorded sale is no exception.
Beverly Hills-based Hawkins Way Capital purchased the site of the former Midtown DoubleTree at 569 Lexington Avenue for $146 million, according to property records. The sale closed in mid-December.
The deal came to less than half of what investment firm RLJ Lodging Trust purchased the hotel for in 2010, when the firm bought the property for almost $332 million, according to property records.

The hotel was owned and operated independently outside of the Hilton portfolio, the hotel chain told Crain’s. The hotel appears to be permanently closed.
Hawkins Way Capital and RLJ Lodging Trust did not immediately respond to requests for comment. A JLL team led by Bob Knakal, Michele Mahl and Gilda-Perez Alvarado brokered the sale. The brokers declined to comment.

RLJ owns three hotels in New York in addition to the recently sold DoubleTree. In 2012, the company paid $82 million for the Upper East Side Courtyard by Marriott, which is still listed in the company’s portfolio.
Hawkins Way boasts more than $1 billion of assets and dabbles often in the hotel market. The California-based investment firm has worked in the past to restore the Mark Twain Hotel in Hollywood. In 2017, it paid $58 million for a 12-story, 97-unit apartment building at 97 Columbia Heights in Brookyn, New York, from the Jehovah’s Witnesses.

There have been a number of hotel sales in recent months in New York, but not many inspire confidence for the industry.
The shuttered Excelsior Hotel was recently sold to Emmut Properties for $80 million and may be converted into a more permanent residential use, although its future is uncertain. Meanwhile, Electric America Hospitality Group bought The Roger New York for only $19 million during the summer, $71 million less than what was paid for it in 2010.

In April, a CBRE study predicted that occupancy rates in the city wouldn’t recover to pre-pandemic levels until 2025. Despite widespread vaccinations, the industry has faced a mixed recovery amid recent case surges from new coronavirus variants.

David Goldsmith

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With NYC Real Property valuations being released this past week https://www.crainsnewyork.com/resid...-values-are-despite-pandemic-and-so-are-taxes
I saw a lot of jawboning about tax breaks for hotels and how the industry has been decimated. I think we have been overbuilt in the hotel sector for some time, yet continue on a blistering pace for new keys.

Extell plans Theater District hotel, avoiding special permit​

Gary Barnett’s project benefits from exemption in new hotel construction requirement​

When the City Council approved new restrictions on hotel development, it all but ensured that Gary Barnett’s Midtown project would remain unscathed.
Barnett’s Extell Development last week received permits for a more than 541,000-square-foot, 1,350-key hotel tower at 740 Eighth Avenue in the Theater Subdistrict, an area in which certain projects are exempt from the recently enacted requirement that developers must obtain a special permit for new hotels.

Extell originally planned a 10-story office building for the site and filed a permit application for that project in June 2020, but new plans calling for a 51-story hotel were filed in April 2021. Pincus Co. was first to report the change in plans for the project, and that the city’s Department of Buildings issued a permit for it on Jan. 7.

“We wanted to do an office building at 740 8th Ave but there were holdouts on 8th Ave that wouldn’t sell for a reasonable price,” an Extell spokesperson said. “The project was grandfathered since we were far along with the hotel, as were other hotel projects around the city.”
In December, the City Council approved a zoning text amendment that requires developers to obtain special permits to construct new hotels or expand existing ones by at least 20 percent. The measure exempted hotels that shelter homeless individuals and grandfathered in projects approved by the DOB before the City Council’s vote.

Applications filed prior to the City Council vote that were not approved by the DOB have a year to get their new building or foundation permits approved in order to be exempted.
The measure also allowed certain new hotels in the Theater Subdistrict to avoid the requirement. Developers can keep filing plans for hotels in the subdistrict as long as they are located on lots of at least 20,000 square feet and at least half of the space is clear of any buildings or otherwise mostly vacant, as is the case with most of the lots in Extell’s assemblage.

The subdistrict is defined as an area bounded by Eighth Avenue to the west and Sixth Avenue to the east, between West 40th and West 57th streets. Given the lot specifications and Extell’s assemblage at the district’s core, Barnett’s firm is a major beneficiary of the carveout.
Projects that meet the measure’s parameters are exempt if the DOB issues a new building or foundation permit on or before Dec. 9, 2023. The projects that are exempt must receive a temporary or permanent certificate of occupancy within six years. But Extell’s project and those qualifying in the subdistrict would have until 2031.

Extell’s project is exempt for its location, and likely for its timing, given that the DOB just issued permits for the hotel. The developer hired Fried Frank last year to lobby the Department of City Planning on issues related to the hotel special permit, as well as unnamed projects, according to city lobbyist records.
From July 20, 2021, through the end of the year, Extell paid the law firm $6,665 for such efforts, according to records filed for last year that list Extell as a client. Fried Frank’s David Karnovsky did not immediately return a message seeking comment.

“The administration did not change the hotel special permit in response to Extell’s requests,” a spokesperson for the Department of City Planning told The Real Deal.
When the City Council’s Land Use Committee proposed and approved the carveout for the theater subdistrict in November, little was said about the rationale for the change. In October, the Real Estate Board of New York testified in favor of an exemption for hotels in the subdistrict, as well as in Times Square, Lower Manhattan, Flushing, Jamaica, Downtown Brooklyn and Long Island City. The trade group argued that there was no land use rationale for the text amendment citywide, but that the change made even less sense in those central business districts.

Extell has been piecing together the development site since 2014, and a critical chunk of it was acquired this past summer. The developer bought two properties at 738 and 740 Eighth Avenue, along development rights, for $51 million, paving the way for a development exceeding 500,000 square feet. Extell had previously acquired part of the site from Related Companies, which had also planned an office building there, according to Pincus Co. Extell has spent at least $186 million assembling the 11 lots over the past seven years.

A few weeks after the City Council approved the text amendment, Extell filed plans for a supertall at 570 Fifth Avenue in the nearby Diamond District. The developer has put forward two options for the site: A 1.5 million-square-foot office project or a 1.4 million-square-foot residential and hotel tower. The latter will require a special permit for hotel use, but the project will require other approvals either way, including two other special permits as well as a text amendment.

David Goldsmith

All Powerful Moderator
Staff member

David Goldsmith

All Powerful Moderator
Staff member

Watermark Capital looks to sell indebted Holiday Inn in Chelsea​

Firm purchased property for $113M in 2013 but fell behind on mortgage payments during pandemic​

A national hotel investor is choosing to cut its losses at a Holiday Inn in Chelsea rather than wait for the city’s hospitality sector to recover.

Watermark Capital is exploring a sale of the 226-key hotel at 125 West 26th Street, between Sixth and Seventh avenues, Crains reported. The investment firm has owned the building since 2013, when it purchased it from Magna Hospitality for $113 million.

The hotel has managed to stay open for most of the pandemic, but has struggled to make up for lost revenue. After sporting an average occupancy rate of 92 percent in 2019, it was only 54 percent occupied as of the fall, and its cash flow had turned negative, according to Crains.

Watermark fell behind on its mortgage payments in October 2020 and the loan was transferred to a special servicer in January of last year, according to the publication. At the time, the property’s value was appraised at $78.4 million, slightly more than its $72 million loan.

So far, the firm has avoided foreclosure by negotiating with its lender. It’s not clear how much it is seeking in return for the property; the buyer would likely need to assume the balance of Watermark’s loan.

Despite uncertainty over the future of the city’s hospitality sector, there appears to be a market for its struggling hotels.

Last month, John Young’s Emmut Properties bought the shuttered Excelsior Hotel on the Upper West Side for $80 million. Emmut has not revealed its plans for the property, but the firm specializes in converting buildings into rental complexes.

That same month, Apple Core Holdings sold the shuttered Hotel at New York City in Murray Hill for an undisclosed price to Prem Jyotish. The building is set to be converted into transitional housing for the homeless in partnership with the Bowery Residents’ Committee.

Under a law passed by the City Council in September, hotels that closed entirely or laid off 75 percent of their staff during the pandemic must either reopen or provide severance pay to their out-of-work employees for up to 30 weeks.

The Hakimian Organization recently filed plans to change a 113,000-square-foot Midtown project from hotel to mainly residential, calling for 136 residential units.

Gary Barnett is one developer bucking the trend. His Extell Development ditched plans for a 10-story office building at 750 Eighth Avenue and has instead received permits to construct a 51-story hotel on the Midtown site.

David Goldsmith

All Powerful Moderator
Staff member
Everyone has a Holiday Inn they want to sell.

Troubled FiDi Holiday Inn asking $187M​

The 50-story hotel at 99 Washington St. facing foreclosure​

The Financial District Holiday Inn may be the tallest in the world, but that distinction hasn’t been enough to keep it afloat amid a failed sale and foreclosure.
The 50-story hotel at 99 Washington Street is for sale, along with the 8,500-square-foot St. George Tavern next door, Crain’s reported. Chinese developer Jubao Xie, who previously tried to sell the hotel in 2017, is seeking $187 million in a sale of both properties.
Eric Anton of Marcus & Millichap is marketing the sale.

Xie may have an uphill battle in selling the hotel, as it is facing foreclosure. Three loans connected to the property have been delinquent since August 2020, according to Trepp data. Crain’s reported the building was more than 90 days delinquent on $87 million in debt by December 2020, making it one of the most distressed hotels in the city.

In September 2018, Xie refinanced the property with a $137 million mortgage. Ladder Capital provided the 10-year, non-recourse, interest-only, fixed-rate loan at the 492-key hotel. Prior to that, Xie was shopping the hotel with an asking price in excess of $300 million.
Xie developed the hotel with Sam Chang before taking control of the property in 2014. According to Crain’s, the IHG-operated hotel had an occupancy rate of 90 percent when the 2018 refinancing took place.

There’s no shortage of indebted Holiday Inn properties on the market in New York City. Last week, Crain’s reported Watermark Capital was exploring a sale of the 226-key hotel at 125 West 26th Street in Chelsea. It’s not clear how much Watermark is seeking, but the investment firm purchased the hotel from Magna Hospitality for $113 million in 2013.

Amid the writing on the wall of the hotel industry, Chan has been on a selling spree in recent months. His McSam Hotel Group in October sold 350 West 39th Street in the Garment District or $166 million, while 100 Greenwich Street sold to Concord Hospitality for $69 million.
The deals followed other sales by the prolific hotel developer, who has signaled an intent to retire, only to keep on being involved in transactions.

David Goldsmith

All Powerful Moderator
Staff member

Maefield loses Times Square Edition​

Natixis-led lenders group won control of 452-room hotel​

A new edition of a noteworthy Midtown hotel could be on the way after new owners last week won control of the luxury lodging.
A lenders group led by Natixis will take over the Times Square Edition Hotel at 20 Times Square from Mark Siffrin’s Maefield Development, the New York Post reported. No bids at a Jan. 26 public foreclosure auction topped the group’s offer, which hasn’t been revealed. The title is expected to be transferred in the coming weeks.

Maefield appeared destined to lose the hotel when a New York state court entered a judgment of foreclosure and sale of the property in November. The hotel’s lenders and Maefield have been in a long-running dispute over the 42-story property.
The 452-room hotel at 701 Seventh Avenue opened to great fanfare in February 2019 and the property was once valued as high as $2.4 billion.
But the hotel struggled to nab retail tenants and generate positive cash flow and lenders wound up suing in 2019. The hotel was closed in March 2020 as the pandemic shuttered the hospitality industry. It reopened last June.
In March, the hotel’s lenders were granted the right to foreclose on the property. The property had been facing foreclosure since December 2019, when the lenders behind a $650 million loan sued the owner for “numerous undischarged mechanics’ liens recorded against the property.”

A $150 million loan for the land beneath the hotel was being marketed for sale, Bloomberg previously reported. The junior loan was part of a $900 million debt linked to the ground.
The details around the hotel’s future under its new ownership are cloudy. According to the Post, the Marriott-owned Edition brand has a strong management contract that can’t be affected by the ownership change, meaning it is likely to stay in place.

Changes are coming, though. The Post reported earlier this month the lenders called upon SL Green to service the building’s loan and consult. The role for Marc Holliday’s company could ultimately lead to SL Green becoming the property’s asset manager, but the Post reported the landlord is not thought to be interested in buying the property.

David Goldsmith

All Powerful Moderator
Staff member
NYC hotels are once again telling their tale of woe and seeking relief. However the problem remains that not only are they already over built (the number of rooms boomed from "74,000 in 2007 to 138,000-plus rooms in 2020. Many of these hotels, such as the wave of hotels developed in manufacturing zones, are out of context with the communities that they were built in, which was only resolved when the city implemented special permits in those areas."
But new keys are being produced at a record pace
(Data firm STR is projecting that 78 hotels with more than 13,000 rooms combined will open in 2021, the largest year for deliveries in recent memory. https://www.wsj.com/articles/new-york-travel-is-down-plenty-of-hotels-are-opening-anyway-11620734401 )

Providing public relief to an industry which continues to overproduce product which there isn't sufficient demand for, and at the same time comes as the expense of affordable housing solutions which NYC is sorely in need of would be a public policy mistake.

David Goldsmith

All Powerful Moderator
Staff member
The industry spin for "full recovery" has been pushed past 2025.

NYC hotels still slogging through slow months

Occupancy up from early January, but still below December levels​

New York City’s hotel industry ticked back up in February after this winter’s slow season hit properties harder than usual.
During the week ending on Feb. 19, hotels averaged a 56.5 percent occupancy rate, according to STR data reported by Crain’s. Occupancy rates for hotels in the city improved from last month to reach the highest of the two-month-old year, but are still trailing levels typical before the pandemic and in the holiday season before the surge of the Omicron coronavirus variant.

February marked a significant step up from the previous month. As the Omicron variant’s spread sparked event cancellations and staff shortages across the country, the city’s occupancy rate dipped as low as 40.3 percent in early January.
Despite ticking up in the midst of a typically slow season, the industry is likely still reeling from how far occupancy has dropped from only two months ago. In the week ending Dec. 11, occupancy hit 81.5 percent, the highest since the onset of the pandemic.

NYC & Company, the city’s official travel agency, has lowered expectations for the year, according to Crain’s. It had predicted there would be 57.8 million visitors to the city this year, already almost 10 million below the 2019 numbers. It is now projecting 56.5 million visitors.

Revenue per available room, another metric of hotels’ success, is also struggling to get back into gear. The revPAR was up $3 in the week ending Feb. 19, but still came in about $50 below the typical levels of pre-pandemic Februaries in 2019 and 2020.

The industry responded when occupancy dipped back down to 42.5 percent, with hotel owners launching a web and TV campaign to tug at the hearts and minds of elected officials.
As the rough numbers pile up, some are feeling dejected about the recovery of the hotel industry, including Hotel Association of New York president Vijay Dandapani.
“Before the Omicron variant delayed a comeback, conservative estimates projected a full recovery for the hotel industry in 2025,” Dandapani told Crain’s. “… Now it could be even longer. Make no mistake: Hotels are struggling.”
Not everyone is professing a dire view of the situation. John Beck, general manager of the Crowne Plaza HY36, told Crain’s he believes his hotel has something to look forward to, as 17 April days are fully booked and occupancy could exceed 90 percent for the month.