"Last straw" for NYC hotel industry?

David Goldsmith

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Over 50% loss

Times Square Sheraton trades to MCR for $356M – a nearly $400M loss

The 1,780-key hotel was sold by Host Hotels & Resorts​


One of New York City’s largest hotels traded hands — at a nearly $400 million loss from its last sale.
Hotel owner-operator MCR agreed to acquire the Sheraton New York Times Square from Host Hotels & Resorts for $356 million, according to research platform Green Street. The 1,780-key hotel last sold in 2006 for $738 million, more than double what it is today, according to property records.
Once closed, the deal would mark the city’s largest hotel sale in about two years, Green Street noted.

The 51-story hotel at 811 7th Avenue is the third-largest in the city by room count. The property, which opened 60 years ago, in February hosted the New York Democratic Convention.
Host attempted to sell the property in 2018 via Eastdil Secured, seeking up to $550 million on a sale, according to Green Street. Two years later, Host acknowledged the fair market value of the property had dropped to $495 million.

MCR owns 140 hotels across 37 states. Other New York hotels in its portfolio include the TWA Hotel, the High Line Hotel and The New Yorker.
The hotel industry showed some signs of life in New York last month, but only after the winter slow season hit properties harder than usual.
Hotels averaged a 56.5 percent occupancy rate for the week ending Feb. 19, according to STR data. The city’s occupancy rate dipped as low as 40.3 percent in early January as Omicron and staff shortages raged.

In the week ending Dec. 11, occupancy soared as high as 81.5 percent, the best mark since the start of the pandemic.
 

David Goldsmith

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Blue Moon Hotel fades into bankruptcy​

Series of unfortunate events befell Lower East Side property after family deal​


Randy Settenbrino hopes bankruptcy only happens once in a Blue Moon. Unfortunately, it did this week.
Settenbrino, the owner of the Blue Moon Hotel on the Lower East Side, filed for Chapter 11 on Wednesday, Bisnow reported. The property, at 100 Orchard Street, has racked up $11.2 million in liabilities, according to the filing.

In the filing, Settenbrino detailed a sordid several years for the property, starting with a 2015 lease agreement with El Idi that came about because of a personal family situation. The lease was a “huge mistake,” the filing claimed, because Idi opened a hostel on the property.

Not only that, but Idi failed to pay rent and real estate taxes and let the property fall into disrepair, according to a lawsuit Settenbrino brought, Bisnow reported. The two sides came to an agreement but Idi allegedly defaulted and left at the start of the pandemic, still owing more than $3.3 million, according to Settenbrino.

Idi then sued Settenbrino months later over a lease-to-purchase option.

Settenbrino also attempted to use the hotel as a New York City homeless shelter. That plan fell apart, however, after lender Brick Moon Capital attempted to foreclose on the property, according to Bisnow.

According to Settenbrino, the Blue Moon property was placed into receivership after Brick Moon made another attempt to foreclose in January 2021. The asset is supposedly worth $21 million.
Settenbrino opened the Blue Moon Hotel in 2006 after expensive renovations and has been trying to mend its finances ever since. In 2014, the property was listed for $19 million with YGNY Realty. Last year, the company resorted to GoFundMe, where it has since raised a little more than $7,500.

The Blue Moon Hotel might be waning, but according to Crain’s, Settenbrino noted in his affidavit that he did not expect the bankruptcy filing to spell the end of the establishment.
The pandemic has flung the hotel sector into distress. This month, Host Hotels & Resorts agreed to sell the Sheraton New York Times Square for $356 million, or $382 million less than it had paid in 2006.
 

David Goldsmith

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Bankrupt hotelier Howard Wu stiffed operator of $23M: suit​

Urban Commons’ exec hit with claim by Highgate Hotels in California bankruptcy court​

Three and a half years ago, Howard Wu’s Los Angeles–based hospitality firm, Urban Commons, made its first foray into New York City, acquiring the Wagner Hotel for $147 million.
But things went south fast, according to Highgate Hotels, the hotel operator he inherited at the Downtown Manhattan establishment.

The pandemic emptied the hotel, forcing it to close in April 2020. While some hospitality businesses in New York have since come back, the Wagner never did. Calls to the hotel go straight to a voicemail recording that says it is closed.
Wu hit bottom in December, filing for personal bankruptcy. In court filings, he reported $15.9 million of assets and $29.9 million in liabilities.
Now Highgate, a hospitality management firm, has filed a claim in California bankruptcy court in an effort to get paid.

According to Highgate’s contract with the firms that sold Wu the Wagner, Millennium Partners and Westbrook Partners, the owner was required to cover the hotel’s operating expenses and to defend the operator from lawsuits and liabilities stemming from its work there.
Urban Compass snubbed several of the agreement’s key terms, Highgate alleges.
Highgate said its operating expenses at the 298-key Wagner totaled $42 million, but Urban Compass only forked over $19.2 million. As a result, Highgate said it hasn’t been able to pay wages and benefits for hourly employees, including severance pay mandated by a controversial de Blasio administration law. The shortfall forced Highgate to stiff some vendors, it claimed.

Amidst uproar over the nonpayment, Wu signed an agreement in Jan. 2021 promising to fulfill all payment obligations under the contract. Throughout last year, Highgate says it sent Wu weekly emails detailing the amounts he owed, as well as three written demands in 2021 for full payment. But Wu came up short.
The problems compounded when the New York Hotel and Motel Trades Council, the hotel workers’ union now called the NY/NJ Hotel & Gaming Workers Union, started arbitration against Highgate for failing to pay into union funds as required. Highgate is demanding Wu also cover the costs of the union arbitration, citing the operating agreement.

Highgate says its weekly tab for mandatory severance pay alone reached $124,850, and that it fronted over $350,000 in October and November paying employees. In all, the hotel operator says, it’s spent more than $1.67 million to make up for Wu’s underpayment.
The operator finally terminated its agreement with Urban Commons in November, and is asking the court to confirm that Wu has to pay the debt to Highgate as he fends off a laundry list of creditors.
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Highgate operates hotels across the United States and Latin America, with more than 65,000 rooms in its portfolio. It was founded in 1988 by Mahmood and Mehdi Khimji. It recently teamed up with New York private equity firm Cerberus Capital Management to buy CorePoint Lodging , a hospitality REIT, for $1.5 billion.
Urban Commons has other problems, including being sued in October for allegedly absconding with a $1 million investment for a hotel acquisition that never happened.
Highgate’s attorney didn’t respond to requests for comment by press time. Wu could not be reached.
 

David Goldsmith

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Midtown South hotel’s value chopped in half: Mid-market report​

Meadow Partners sold the Gregory at $30 million discount​

The rebound in business travel did not come in time for one Midtown South hotel.
A 132-key hotel called the Gregory has emerged from foreclosure with approximately half the value it had after Meadow Partners’ spent about $60 million to buy it in 2014 and renovate it.
The foreclosure sale was one of 10 deals between $10 million and $40 million recorded in New York City last week. Manhattan and Brooklyn each had four and Queens and the Bronx had two apiece. Combined, the sales fetched $201 million.
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Vlash Pepa and Denis Xhari bought the Gregory Hotel out of foreclosure at 42 West 35th Street, in one of the city’s major business districts, for $33.9 million. Eight years ago, real estate investment firm Meadow Partners bought the 55,500-square-foot building for nearly $50 million and spent $10 million on renovations. Luxembourg-based lender AllianceBernstein began foreclosing on the property in April 2021.

In other deals, Gideon Platt’s GP Properties bought a 55,000-square-foot apartment building with 55 units at 105 West 55th Street in Midtown for $32 million. Melohn Properties sold the building.

Jack Deutsch of Woodcrest Property bought a 76,000-square-foot nursing home at 119-09 26th Avenue in College Point, Queens, for 31 million. The Weingarten and Schon families were the largest of seven owners who sold the building.

Gasoline station and convenience store chain Speedway sold a 27,500-square-foot parcel at 401 West 207th Street in Inwood for $25 million. Iconix Brand Group and wholesale beverage seller Taino Group were the buyers. The property was part of a $42.6 million portfolio sale that included 210 Greenpoint Avenue, 2864 Atlantic Avenue and 1885 Atlantic Avenue in Brooklyn.

Sam Shpelfogel bought a 23,000-square-foot medical center at 1401 Newkirk Avenue in Ditmas Park, Brooklyn, for $18 million. Jeffrey Berger of B&K Realty Associates was the seller.

Affordable housing developer Phipps Houses Group bought a 38,000-square-foot development site at 110 East 138th Street in Mott Haven, Brooklyn, for $16.1 million. Ryden Realty was the seller. The parcel has a development potential of 176,000 square feet with an inclusionary housing bonus.
Perfume Worldwide’s Piyush Golia bought a 13,800-square-foot office building at 8 East 41st Street in Midtown South for $12.4 million. The Wings Group sold the property.

Robert Saffayeh bought a 19,850-square-foot parcel at 205 14th Street and 228 13th Street in Park Slope, Brooklyn, for $11.25 million. A parish of the Catholic Church sold the properties, which include a 6,600-square-foot residential building used as a rectory and a 22,900-square-foot church.

Yoel Zagelbaum signed as the borrower for the entity that bought a 11,600-square-foot retail and office building at 1732 Webster Avenue in Claremont, the Bronx, for $11.25 million. An affiliate of Daniel Rabinowitz was the seller. The 5,100-square-foot parcel sits in a Qualified Opportunity Zone. The purchasing company received $84.9 million in loan proceeds from Colorado-based Bear Creek Investors.

Abraham Leifer’s Aview Equities bought a 18,500-square-foot development site out of bankruptcy at 232 Seigel Street in Bushwick for $10.5 million. Prior owner Toby Moskovits’ Heritage Equity Partners had planned to build a hotel on the site but could not secure construction financing before lender Fortress Investment Group foreclosed on the acquisition loan.
 

David Goldsmith

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Loss of $21B in business travel to dampen hotel recovery

Report anticipates 23% shortfall in 2022 from pre-pandemic​

As hotels fight to recover from the pandemic’s ravages, a continued downturn of business travel will continue to harm the market.
Hotel revenue from business travel will remain 23 percent below 2019 levels in 2022, American according to a forecast from the Hotel & Lodging Association and Kalibri Labs reported by Bloomberg. The nationwide shortfall amounts to a projected $20.7 billion revenue loss when compared to three years ago.

Though leisure travel is forecast to exceed pre-pandemic levels, hotel revenue from business travel is projected to hit $69 billion this year, well short of 2019’s $90 billion mark. Still, the forecast is looking better than it did the previous two years, when hotels lost an estimated $108 billion in revenue.
Unfortunately for the sector, the forecast shows business travel isn’t expected to recover until 2024 at the earliest.

For some big cities, the hit will be even harder for the coming year.
In New York City, revenue from business travel is estimated to reach $2 billion this year, less than half of the $4.5 billion hotels made in 2019. In Chicago, projections call for $1.3 billion in business travel revenue, down 48.7 percent from $2.5 billion in 2019.

San Francisco will be feeling the most staggering effects among the major markets. The report projects only $762 million in business travel revenue this year, a precipitous 68.8 percent drop from three years ago.

Despite the tough blow continuing to come from a lack of business travel, there are still signs of optimism in the hotel market. More than $12.5 billion in hotel sales occurred in the first quarter, according to CoStar data, a six-year high for the first three months of the year.
Real Capital Analytics reported hotel values climbed 18 percent year-over-year in March and hotel sales prices are outpacing profits, signs of an optimistic outlook for the sector.
 

David Goldsmith

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Midtown hotel portfolio sale suggests big value drop​

Sonesta picks up four properties from Denihan at apparently large discount​

A portfolio of four Manhattan hotels traded hands in a deal that could reflect how far property values have fallen in the struggling sector.
Massachusetts-based Sonesta International Hotels purchased the Benjamin, the Shelburne Hotel & Suites, the Gardens Suites Hotel and the Fifty Hotel & Suites from Denihan Hospitality Group, the company announced Wednesday.

The price was not disclosed, but lender Ramsfield Hospitality Finance announced that it provided Sonesta with a $239 million acquisition loan for the deal. The amount suggests the portfolio’s value has dropped significantly.
Back in 2016, Denihan refinanced the four hotels with a $320 million loan from Goldman Sachs. If Goldman and Ramsfield financed the portfolio at the same loan-to-value ratio, that would indicate a roughly 25 percent decline in its value.

Sonesta, which previously owned the Plaza Hotel, is the eighth largest hotel company in the country.
“For Sonesta, this investment marks a significant milestone in our growth as we re-enter the New York City market, which is one of the largest and most dynamic markets in the world,” company CEO John Murray said in an announcement.
Representatives from Sonesta and Denihan did not respond to requests for comment on the deal. A spokesperson for Ramsfield declined to comment on the price.

Denihan is retaining a minority interest in the properties.

The Sonesta purchase is the latest hotel deal indicating that values in New York City continue to struggle, even as other parts of the country recover.
Hotel owner-operator MCR in March agreed to buy one of the city’s largest hotels — the 1,780-key New York Times Square from Host Hotels & Resorts — for $356 million. That’s less than half the $738 million it sold for in 2006.
Nationwide, hotel values have climbed 18 percent from March of last year, according to Real Capital Analytics. Investors optimistic about hotels’ recovery spent more than $12.5 billion acquiring properties in the first three months of the year, the highest for a first quarter since 2016.
But leisure travel is leading the recovery. Business travel — which hotels in New York and other big cities rely on — isn’t expected to return to normal until 2024, according to the Hotel & Lodging Association.

 

David Goldsmith

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Times Square Sheraton loss $33M worse than reported

Seller got $415M less than it paid in 2006​

The seller of one of New York City’s largest hotels suffered an even greater loss on the deal than was initially reported.
Host Hotels & Resorts unloaded the Sheraton New York Times Square Hotel to MCR Investors for $323 million, according to property records filed Tuesday.

It was reported in March that MCR acquired the 1,780-room hotel for $356 million, or $33 million more than the actual price.
The sale represents a humbling haircut for Host, which purchased the 51-story hotel for $738 million in 2006, when the economy was humming and New York City tourism was in the midst of an unprecedented rise.
Still, MCR’s purchase of the property, at 811 7th Avenue in Midtown, is New York City’s largest hotel deal in about two years.

The Times Square Sheraton opened 60 years ago and stands as the third-largest hotel by room count in New York City. It hosted the New York Democratic Convention in February.

Host attempted to sell the hotel for up to $550 million in 2018 with help from Eastdil Secured. Two years later, in the first year of the pandemic, Host acknowledged that the value of the property had dropped to $495 million. But that proved to be optimistic as business travel has yet to reach pre-Covid levels and perhaps never will.
MCR, a hotel owner and operator, has not shied away from acquiring properties during the pandemic, despite the struggles of the sector and tourism at large. Two years ago, the company acquired the storied Royalton Hotel in Midtown Manhattan from hotel operator Highgate and real estate investment firm Rockpoint Group for $40.8 million.
MCR was also part of a joint venture, along with Andrew Farkas’ Island Capital and Three Wall Capital, that acquired the shuttered Lexington Hotel in Midtown Manhattan last year for $185 million.

MCR owns 140 hotels across 37 states. Other New York City properties in its portfolio include the TWA Hotel, the High Line Hotel and the New Yorker.
The hotel industry is expected to continue recovering this year, but is unlikely to reach pre-pandemic levels before 2024. A forecast from the Hotel & Lodging Association and Kalibri Labs estimated New York City hotels would reap $2 billion from business travel this year, less than half of the $4.5 billion they made in 2019.
 

David Goldsmith

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Related sues Meadow after foreclosure on Garment District hotel​

Pain from failed deal for the Gregory did not end with its sale​

Even venerable real estate firms have deals they would rather forget.
For Midtown-based Meadow Partners, the purchase of the Gregory Hotel is one.

The developer bought the Garment District establishment, then known as Hotel 35 Herald Square, for nearly $50 million in 2014 and invested about $10 million in renovations. In April 2021, a year after Covid shut down the city, the hotel’s lender, AllianceBernstein, initiated a foreclosure.

After another year, investors Denis Xhari and Vlash Pepa bought the hotel, at 42 West 35th Street, in a foreclosure sale for $32.8 million — barely half of what Meadow Partners had invested in the property.
Unfortunately for Meadow Partners, the foreclosure sale was not the end of it.
A Related Companies fund is now suing the firm for breaching its guarantee on a $15 million mezzanine loan. Related is seeking $8 million from Meadow for unpaid loan payments, according to the lawsuit in New York Supreme Court. PincusCo first reported the suit.

The lawsuit provides more than just a window to Meadow’s failed deal. It reflects the sorry state of New York’s hotel market and is a reminder that a completed foreclosure does not stop lenders from pursuing debts.
In 2017, a Related Companies fund provided the mezzanine loan. The financing agreement required Meadow Partners to “unconditionally and irrevocably” guarantee payment on the debt service and carry costs. That same year, Meadow Partners refinanced the property with a $31 million senior mortgage from AllianceBernstein.

Trouble started around July 2019. That’s when Meadow first defaulted on its debt service, Related alleges. Things got worse the next year when the pandemic cut off the flow of tourists and business travelers to the city. Meadow defaulted on its senior loan in April 2020 and failed to repay the mezzanine loan by its December 2020 maturity date.
The hotel had internal issues, too. Employees stopped getting paid and a battle ensued between Meadow and the hotel manager, Highgate Hotels, over who should write the checks. Highgate alleged that Meadow refused to fund the operating fund used to pay employees. Workers only got paid after their union, the New York Hotel Trades Council, stepped in.

Often, a mezzanine lender can recoup debt from a troubled project by initiating a UCC foreclosure, which can allow it to essentially take control of the property while still paying the senior debt.
But that did not happen at the Gregory. In April 2021, the senior lender, AllianceBernstein, filed a foreclosure notice. Five months later, the court issued a judgment of foreclosure.

That loan was sold in February to Josh Zamir’s and Daniel Ghadamian’s Capstone Equities, which completed the foreclosure sale to Xhari and Pepa.
New York’s hotel market has yet to recover from the pandemic. Business travel — on which hotels in New York rely — isn’t expected to return to normal until 2024, according to the Hotel & Lodging Association.

Notably, in March, hotel company MCR agreed to buy one of the city’s largest hotels — the 1,780-key Sheraton New York Times Square — for $356 million. That’s less than half the price it sold for in 2006.
Meadow Partners, founded by Jeffrey Kaplan in 2009, has been among the more active New York buyers lately. In late 2021, it bought a Chelsea office building from Columbia Property Trust for about $170 million and a Midtown office condominium from SL Green for $117 million.

Meadow Partners did not return a request to comment. Related Companies’ attorneys in the lawsuit also did not return a request for comment.
 

David Goldsmith

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Apparently the solution to NYCs hotel occupancy issue is to open up a whole lot more hotels.
NoMad hotel market set for 25% property boost

Six hotels slated for neighborhood by year’s end​

NoMad is slated for the debuts of several new hotels that could bring a business boost to the area not accustomed to large amounts of tourists.
Six hotels are expected to open in the neighborhood by the end of this year, Crain’s reported, raising the area’s stock of properties 25 percent.

The Ritz-Carlton New York, NoMad is scheduled to open next month. General manager Bastian Germer told Craiin’s he expected to be fully booked at rates starting at $1,100 a night from Labor Day to the end of the year.

The other hotels coming to the neighborhood this year include the Ned NoMad (replacing the NoMad Hotel), the Virgin Hotel, Hotel AKA NoMad, Le Meridien and the Fifth Avenue Hotel.
The NoMad Hotel serves as an example of the turnaround for the sector in the neighborhood. In May, billionaire investor Ron Burkle and hotelier Andrew Zobler were facing foreclosure on the trendy hotel at 1170 Broadway, marking the second time they faced foreclosure on the property.

By the end of the year, however, Safehold purchased the ground lease at the property for $77 million. Last month, Soho House announced The Ned would be opening at the property. The 12-story building will include a members club, restaurants and 167 rooms across 10 stories.

There are a number of attractions hoping to bring in tourists to the neighborhood, which sits downtown from tourist mainstays like the Empire State Building and Times Square. The Harry Potter store is one such destination, buzzing with aspiring wizards since it opened a year ago. The neighborhood also has the flagship Milk Bar bakery, the Lego Store, Eataly and Madison Square Park.

Still, the city’s hotel industry is struggling to recover from the pandemic, which limited travel, stunted occupancy and set off a wave of closures across the city. The Hotel Association of New York City reportedly pitched the City Council to consider a steep cut to the occupancy tax rate on hotel stays in an effort to boost visits.
The association pushed the City Council and Mayor Eric Adams to slash the rate to below 3 percent, about half of the current rate of 5.9 percent. Last summer, the occupancy tax rate was temporarily suspended for several months over the summer.
 

David Goldsmith

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Williamsburg hotel project up for bankruptcy sale​

Owners of planned 26-story tower at 159 Broadway filed for bankruptcy in 2020​

A Williamsburg hotel project is up for grabs in a bankruptcy sale more than four years after plans were filed for the tower at 159 Broadway.
The project, which is under construction, is being marketed by Rosewood Realty Group, the Commercial Observer reported. Bidding for the project will start at $28 million.

The owners of the planned 26-story hotel and residential tower, 159 Broadway Member and WB Bridge Hotel, reportedly filed for bankruptcy towards the end of 2020. The former has ties to Cornell Realty Management, sharing an address with Isaac Hager’s firm.

Cornell did not respond to the Observer’s request for comment.
Cornell filed plans at the site in 2018, calling for a mixed-use building with 21 residential units and 235 hotel rooms. The building was set to rise 277 feet tall and span about 96,000 square feet, including 77,000 square feet of commercial space and 18,000 square feet of residential space.

The company paid approximately $26.2 million for the site in November 2017, according to property records.

Construction is paused at the site but can be resumed by an owner immediately, according to the Observer. The site is in the early stages of excavation. It’s situated in a qualified opportunity zone and includes a 25-year industrial and commercial tax abatement.

Bankruptcy and Williamsburg hotels have combined to make headlines recently. Earlier this month, bankruptcy judge Robert Drain stripped developers Toby Moskovits and Michael Lichtenstein of control of the bankrupt Williamsburg Hotel after it was found they might have committed fraud.
An independent trustee was put in control of the 147-room hotel for the bankruptcy process. Moskovits and Lichtenstein remain the owners, but have been removed from overseeing operations.
 

David Goldsmith

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Staff member
There's something dysfunctional in the market when hotel owners are taking these kind of write downs yet there are still thousands of new rooms being built.

Watermark Capital sells Holiday Inn in Chelsea for $80 million​

Two Kings Real Estate picks up 226-key property for 30% less than what seller paid​

Watermark Capital has found a taker for the struggling Holiday Inn in Chelsea.
Two Kings Real Estate bought the 226-key hotel from the Chicago-based investment firm for $80.3 million, according to city property records filed Tuesday. Two Kings principal Christopher Wang signed for the buyer. Brendan Medzigian, Watermark’s head of transactions, signed for the seller.

Two Kings acquired the property at 125 West 26th Street for 30 percent less than the $113 million Watermark paid Magna Hospitality for the hotel in 2013. The New York-based real estate operator did not immediately respond to a request for comment.
Watermark had been looking to sell the indebted hotel since January in an effort to cut its financial losses. The national hotel investor fell behind on its mortgage payments in October 2020 and the loan was transferred to a special servicer in January 2021. At the time, the property’s value was appraised at $78.4 million, slightly more than its $72 million loan.

The firm had avoided foreclosure by negotiating with its lender, but it was expected that a buyer would need to pick up the balance of Watermark’s loan.
The Holiday Inn, located between Sixth and Seventh Avenues, has managed to stay open for most of the pandemic. However, the hotel has struggled to make up for lost revenue as the city’s hospitality industry has slowly recovered.

After sporting an average occupancy rate of 92 percent in 2019, the hotel was only 54 percent occupied as of this past fall, and its cash flow had turned negative. Built in 2006, the 64,800-square-foot property spans 24 floors.
The sale of the Holiday Inn in Chelsea is the latest transaction in which a seller has had to offload a hotel for far less than what they bought it for.

The Hilton Times Square was bought by Apollo Global Management and hospitality investor Newbond Holdings for about $85 million — just slightly more than one-third of its $242.5 million sales price from 2006.
The Times Square Sheraton was purchased by MCR Investors for $323 million from Host Hotels & Resorts. While it was the city’s largest hotel deal in two years, the property sold for $415 million less than what Host had paid for it in 2006 when the economy and tourism were strong.
New York City’s hotel sector is expected to continue its recovery this year, but is unlikely to reach pre-pandemic levels before 2024. The Hotel & Lodging Association and Kalibri Labs in April estimated hotels would generate $2 billion from business travel in 2022, less than half of the $4.5 billion they accumulated three years ago.
 

inonada

Well-known member
There's something dysfunctional in the market when hotel owners are taking these kind of write downs yet there are still thousands of new rooms being built.
Why? Suppose someone bought (overpaid for?) a widget for $10 in 2013, but you can produce it for $3. Does a write down from $10 => $5 imply dysfunction?
 

David Goldsmith

All Powerful Moderator
Staff member
No, but producing more that cost $15 does. i.e. both land and construction costs remain at or near all time highs.
 

David Goldsmith

All Powerful Moderator
Staff member
Tourists Are Flocking Back to NYC, But Fear of Crime May Be Keeping Day-Trippers Away

Hotel occupancy has rebound to near pre-pandemic levels, but jobs in the leisure and hospitality sector remain far below pre-pandemic levels.​

Tired of being stuck at home in Bologna, Italy, Frederico Lelli decided in January to book a summer trip to New York City with his children, his cousin and his cousin’s wife. He’d been to the city five times already, but Lelli wanted to introduce his family to the Big Apple.
On Tuesday, the Lellis had breakfast at a Dunkin Donuts in Times Square, sampling the chain restaurant’s signature fried dough for the first time. Then they headed downtown to check out Wall Street, Chinatown and Little Italy before seeking out more off-the-beaten track destinations.
“We wanted to get some freedom back and why not come to New York,” Lelli said. “We knew when we booked the trip there was some risk of cancellation and things like that, but why not take the risk.”
Today, millions of people like Lelli have decided to follow the same path and, in a sign of hope for the city’s economy, tourism to New York City is rebounding much stronger than expected.
Hotel occupancy for the week of June 25 hit 87% of pre-pandemic levels, the highest of any major market in the country, according to STR, which tracks travel and tourism. Room rates for that week averaged $309 a night, higher than any other U.S. market outside of Hawaii and the Florida Keys.
And Times Square is seeing an average of 300,000 visitors a day, not far from the 365,000 people a day it averaged in 2019. One Sunday in June, it topped 400,000 visitors, just above the 2019 crowds for the same day.

As a result, the city’s tourism arm NYC & Company raised its forecast last month, predicting that visitors this year would slightly exceed its previous prediction of 56 million (compared with only 33 million in 2021). NYC set a record for tourists in 2019, with just slightly more than 66 million visitors in the year before the pandemic.

This unexpected summer tourist boomlet has provided a lifeline to hotels whose bottom line was devastated by pandemic shutdowns. Some restaurants in tourist areas that survived the last two years have also reported sharp upticks in business.
“Travelers are beginning to return to New York and they are coming from far afield,” Fred Dixon, CEO of NYC & Company said last week at a forum hosted by the Center for an Urban Future. “There is an enormous amount of pent up demand domestically and internationally among people who have not been able to travel."

The desire to travel by domestic and international tourists like the Lellis have defied concerns about the soaring costs of travel. Surveys by AAA show record travel for Memorial Day and the July 4th holiday in the United States.
Business travel has also rebounded, surprising those who speculated that virtual meetings would permanently shrink the need for it. American Airlines, a major carrier at LaGuardia and JFK airports, recently told investors that business travel had reached 80% of 2019 levels and would soon reach 90%.

Who’s Afraid of Crime?​

In something of a surprise, a sizable chunk of missing visitors are those from the New York metro area, a deficit tourism officials attribute to new fears of crime sparked by a constant drumbeat in the media. Crime has risen in the city’s pandemic era, but remains historically low compared to previous decades; fear of crime, however, has risen steadily.
“We need the suburbanites to be comfortable coming into the city to support Broadway, to eat in our restaurants, to go to Little Italy in the Bronx,” Dixon said. Historically, such day trippers account for half of all visitors, he added.
Dixon took a media tour of Europe in the spring, a week after the subway shooting in Brooklyn, sure that the journalists he talked to, especially those in France and the United Kingdom, would be preoccupied with the incident. He prepared himself for a barrage of questions on crime and gun violence.
“Over five days it didn’t come up one time,” he said.
But in the New York metro area, residents are carefully following media coverage of crime, he added, and the agency’s sentiment tracking surveys show they are concerned about their safety.
Mark Fox, who runs the Fox Lifestyle Hospitality Group, which owns restaurants like Manhattan’s White Oak Tavern, agrees. He lives in Nassau County and his friends there question the choices made by the professional office workers who are Fox’s core customers.
“Those that have not or are rarely in the office have a very dim view of public safety,” he said. Not only don’t they venture into Manhattan, “they do not allow their 18- to 22-year-olds to come to the city,” he said.

Survival of the Fittest​

Further complicating this summer’s tourism boomlet is the fact that fewer businesses — and fewer workers — are benefitting from it. Jobs in the leisure and hospitality sector remain far below pre-pandemic levels.
The survivors of the pandemic are better off because of the hollowing out of the tourism industry. The sharp uptick on hotel rates, for example, is partly a result of the hotel rooms that closed during the pandemic and which have not reopened, estimated at about 10,000.

It is the same story for restaurants.
Fox notes that his eateries are seeing business travelers, weekend visitors from elsewhere in the country and now international travelers, who have come in increasing numbers since the U.S. government dropped its requirement for negative Covid tests before boarding inbound flights.
Fox’s six-unit group was down 60% from 2019 revenues last year. Now it is 20% ahead of that year.

“A lot of places closed and the places that were able to reopen and maintain strong Covid policies have enhanced consumer confidence,” he said. “As the economy recovered, they benefited from that confidence and fewer competitors in the market. That’s the main driver of our success.”
In part because of all those closed hotels and restaurants, employment in the sector remains depressed.
An analysis prepared by the Center for an Urban Future shows the city remains 66,000 leisure and hospitality jobs below the 2019 record, and that doesn’t include positions at airports and retail stores that haven’t been restored. The sector accounts for about a third of the city’s gap with the 2019 peak.
The loss of those jobs is in large part the cause of the city’s inequitable recovery. Two-thirds of all leisure and hospital jobs are held by people of color; half are immigrants. Nine of out 10 jobs in the industry are open to people without a bachelor’s degree, the Center notes.
And while soaring and persistent inflation has yet to cut into travel demand, Dixon thinks that 2023 will see only modest growth. Pent up demand will be met, and higher prices will deter some people from expensive trips, he predicts.
But many businesses that cater to tourists remain confident about the future.
The lack of office workers in Times Square remains a problem for Virgil’s Real Barbeque and Carmine’s Italian Restaurant, the famed family style eatery. But Virgil’s is back to 2019 revenue and Carmine’s has slightly exceeded its 2019 volume, said owner Jeff Bank.
Later this year, Bank plans to open a 13,000-square-foot fish restaurant on West 43rd Street between Sixth and Seventh avenues.
“Absolutely I’m optimistic about Times Square. Otherwise we would not be doubling down on this location,” he said.
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David Goldsmith

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Chelsea Hotel To Close, Be Converted To 625-Unit Apartment Building
The Stewart Hotel's owners have announced plans to demolish the hotel in favor of a new residential building.

Add the Stewart Hotel to list of Manhattan hospitality properties shuttering permanently.
The 618-key hotel in Chelsea, which was built in 1929, is being converted to a 625-unit apartment building, Crain’s New York Business reports.
The building was acquired by Ray and Jack Yadidi of the Sioni Group and Isaac and Eli Chetrit in 2016 for $213M, Crain's reported. The developers plan on converting the hotel at 371 Seventh Ave. to an entirely market-rate rental building, with amenities including coworking space, yoga rooms and a golf simulator. The conversion is expected to take between 24 and 36 months to complete.
The Yadidis told Crain’s that they hope to keep the hotel open through the end of this year. The hotel filed a notice to the New York State Department of Labor that it expects to close permanently and lay off 158 staff by Oct. 7. Staff secured a buyout via their union, the New York Hotel & Motel Trades Council, which includes several months’ severance pay and priority for jobs in the residential building once it opens, according to Crain’s.
NYC's hotel owners are struggling, even amid bullish predictions on the sector’s rebound from investors and long-term health. Several Manhattan hotels have sold at drastically discounted prices since the start of the year, while city lawmakers mulled over changes to tax laws to subsidize the embattled properties.
Residential rents, meanwhile, are reaching record highs across the city, with median rents hitting $4K per month in May, according to a report from Douglas Elliman.
Those factors meant that although the Stewart’s owners say they wanted to maintain the property as a hotel longer term, they made their decision based on demand for hotels remaining muted amid soaring demand for residential properties.
"We wanted to keep it as a hotel. It just never panned out," Ray Yadidi told Crain’s. "I think a lot more offices and hotels have to get converted to residential until those prices start cooling down."
The hotel may have an easier time getting its documents lined up for the conversion than others. Many hotel owners wishing to convert their properties into residential buildings may face difficulties with their zoning designation. Gov. Kathy Hochul signed a bill to ease the zoning process for hotel-to-residential conversions in June.
The Stewart’s proposed conversion is by-right, the Yadidis told Crain's, adding that they were close to securing a financing deal for the conversion.
 

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Schrager, Witkoff default on Public Hotel mortgage
Steve Witkoff and hotelier Ian Schrager have run out the clock on their mortgage at the hip Public Hotel on the Lower East Side, and now it’s costing them.

The developers defaulted on their $189 million mortgage backing the 367-room hotel at 215 Chrystie Street after blowing past its maturity date, and are now paying a 9 percent penalty interest rate.

Their lender, Deutsche Bank, is looking to sell the non-performing loan, according to marketing materials from Eastdil Secured, which is handling the note sale. An investor could buy the debt to take control of the property through foreclosure or look to negotiate with the borrowers to get repaid.

Witkoff declined to comment. Schrager and Deutsche Bank did not immediately respond to requests for comment.
The partners developed the 26-story building, which also includes 11 condominium units, in 2017, promising to bring affordable luxury accommodations to the trendy neighborhood.

The hotel was forced to shut its doors at the onset of the pandemic in March 2020, which Schrager called “an agonizing decision” and “one of the hardest things I have had to do in my entire career.”

The Public reopened last summer with a bash attended by celebrities including Zoë Kravitz and Julia Fox, the New York Post reported, but its troubles weren’t over.

The property became embroiled in a lawsuit brought by EB-5 investors who claim Schrager and Witkoff loaded the property up with debt and siphoned off more than $100 million for themselves.

At a hearing in March, an attorney for the developers said they had pumped $20 million in rescue capital into the hotel over the past two years to keep it afloat, and that the EB-5 investors’ lawsuit was impeding efforts to refinance the property and avoid foreclosure.
 

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I'm not sure how they define capacity, but 1,000 capacity with 96 rooms sounds like a party.

"Guest rooms range in size from 900 to 1,200 square feet, with a total hotel capacity of 1,000 guests."

456 Greenwich Street Completes Construction in Tribeca, Manhattan​

456-Greenwich-Street-Exterior-Rendering-777x503.jpg

Construction is complete on 456 Greenwich Street, an eight-story hotel building in Tribeca. Designed by Stephen B. Jacobs Group and developed by Caspi Development, the 94,000-square-foot structure yields 96 Art Deco-inspired guest rooms with interiors by Martin Brudnizki Design Studio. Groupe Lucien Barrière of the Hôtel Barrière Le Fouquet’s Paris is the operator of the property, which is bound by Greenwich Street to the east, Desbrosses Street to the south, and Washington Street to the west.
At the time of our last update in February, much of the upper extensions above the parapet remained covered in scaffolding and black netting, and sidewalk scaffolding still surrounded the property. All of this has since been dismantled, revealing the finished look of the ground-level frontage and the metal-paneled volumes at the top of the structure. Only a small section of construction barricades remains around the southwestern corner of the property.

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young
Also added since our last update are new metal canopies and light fixtures over the ground floor of the main southern elevation and shorter eastern and western profiles. New sidewalks have also been poured around the site.

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young

456 Greenwich Street. Photo by Michael Young
Guest rooms range in size from 900 to 1,200 square feet, with a total hotel capacity of 1,000 guests. Thirty percent of the rooms are suites. Amenities for 456 Greenwich Street include six food and drink vendors, a 1,500-square-foot interior landscaped courtyard, a private members club, a fitness center, an outdoor rooftop swimming pool, and a two-story cellar with meeting spaces, event rooms, a spa, and the largest hotel-based theater in Lower Manhattan with a capacity of over 100.
The closest subways from 456 Greenwich Street are the 1, A, C, and E trains at the two Canal Street stations to the east along Varick Street and Sixth Avenue. Hudson River Park is a short walk to the west. There are also a number of art galleries in the vicinity and numerous dining options to the south.
 

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How the Ritz-Carlton NoMad avoids violating short-term rental ban​

Hotel/condo combo caps owners' stays to beat anti-Airbnb law​

The Ritz-Carlton NoMad is slated to break a neighborhood sale price record and roll out a model that legally bypasses the city’s short-term rental restrictions.
The hotel/condo combo by Paul Kanavos’ Flag Luxury Group limits owners of the 16 penthouse units to staying 120 days out of the year and 29 days at a time in the branded luxury residences.
The arrangement means the property, at 25 West 28th Street, can maintain commercial zoning because the owners aren’t considered full-time residents. It allows the Ritz-Carlton Nomad to circumvent restrictions of the site’s manufacturing zoning, where residential use is generally not allowed.
Penthouse units at the Ritz come with lockable owners’ closets for safekeeping residents’ belongings while guests use the condos as hotel rooms. All rooms come with two room numbers, so owners can rent out one bedroom and stay in the rest of the unit with complete privacy. Move-ins begin Oct. 15.
Owners can also rent their units out as hotel rooms in their absence, effectively working around the city’s Airbnb restrictions, according to John Beene, special counsel at Stroock Stroock & Lavan, a New York-based real estate law firm.
“There must be a market for people who want to own something for an investment vehicle but don’t need to live in it,” said Beene, who is not involved in the project. “It’s a very creative solution.”
Hotel representatives declined to say how the Ritz, which manages the rentals, splits that money with unit owners.
New York state law requires a resident to be present when renting out a unit for fewer than 30 days. That prevents many investors from adopting the kind of model offered at the Ritz. Setting up a short-term rental would be arduous at best for many homeowners in the city, and perhaps impossible based on local zoning.
“Today in the city there isn’t anywhere you can start doing Airbnb lawfully,” Beene said. “In an area where you can have a hotel, yes, there’s a path to getting an approval for a transient use, but there’s some code implications — you’re not going to be able to do it and comply with code without permit filings and a lot of paperwork.”
Despite limiting stays and a lagging tourism industry in Manhattan, the Ritz is poised to break the NoMad neighborhood price-per-square-foot record when Unit PH42A, under contract for $7.8 million, closes. A TRD Pro analysis of city data shows that would price the 1,750-square-foot two-bedroom at $4,457 per square foot, breaking the previous record by roughly $200.
“We priced aggressively and we achieved those numbers,” Douglas Elliman’s Erin Boisson Aries, the broker leading sales at the property, said.
Eight of the building’s 16 units are in contract for the full asking price or above. Nightly rates for the one-bedroom units range from $4,000 to $20,000 and the two-bedrooms go for $9,000 to $25,000 a night. Last-minute bookings for hotel rooms on Friday started at just under $1,000.
Owners at the Ritz are betting tourism will return in full to Manhattan, which so far hasn’t happened.
The borough’s domestic tourism is lagging behind 2019 levels and has not recovered to the extent that Brooklyn’s has, according to data from Placer.ai, which tracks cell phone location data. Tourism in Manhattan in June fell relative to 2019 for the second straight month, despite briefly eclipsing pre-pandemic numbers in April.
While Placer doesn’t track trends within different sectors of the tourism industry, it does track visits to luxury retail brands. The rates are down nationally, suggesting tourism among the upper crust in Manhattan could also be down.
“For the months of June and July we’re running high-teens declines for much of the luxury sector, according to the luxury retail index,” said R.J. Hottovy, head of analytical research at Placer. “I imagine [Manhattan] is not too different from the national trend on that one.”

Hottovy pointed to inflation, the end of pandemic-related stimulus payments and the re-emergence of travel to Europe as possible explanations for Manhattan’s slow tourism season. Things could get worse before they get better: Summer is typically the city’s peak tourism season until the holidays.
“We don’t see strong visitation trends in the fall,” Hottovy said. “As things business-wise normalize, I think you’re going to see a rebound in tourism. I just don’t know how quickly that’s going to happen.”
 

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Hidrock’s FiDi hotel project facing foreclosure​

Lender accuses developer of defaulting on $33M loan for 140 Fulton Street​

A hotel development project in Lower Manhattan delayed by the pandemic appears to be on unsteady financial footing and facing foreclosure.
Bank Hapoalim is alleging that Hidrock Properties has not paid back the $32.8 million loan that the Israel-based lender provided for its purchase and development of 140 Fulton Street in the Financial District, Crain’s reported.

Hidrock purchased the 2,700-square-foot vacant lot and an adjacent six-story building at 140-142 Fulton Street for $19.8 million in 2018. The property, which had five apartments and a restaurant, was demolished.

Hidrock filed permits in 2019 to build a 139,000-square-foot hotel, New York Yimby reported. The site, located mid-block between Broadway and Nassau Street, was expected to be occupied by a Tempo by Hilton.

But the pandemic brought the 286-key, 40-story project to a halt, and financial issues soon followed. Hapoalim pushed back the loan’s maturity date three times, with the most recent extension coming last October when it moved the deadline to March, according to court records.
But Hidrock allegedly failed to meet that deadline, and Hapoalim notified the developer in May that it was in default.
Hidrock claimed it was caught by surprise, saying it believed Hapoalim had approved a fourth extension and formally agreed to do so. Hidrock is asking a judge to rule that the developer has not defaulted on its loan obligations.

“Business travel is finally ramping back up in New York, and now that Labor Day is past, we expect things to normalize soon,” Hidrock’s Abie Hidary told the publication. “We expect both sides to come to a resolution to get the project built.”
 

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Foreclosure looms at struggling Row Hotel​

David Werner behind on mortgage as establishment fails to pay rent​

A foreclosure connected to one of New York’s biggest hotels is the latest sign of trouble in the city’s hospitality sector.
Wells Fargo moved Monday to wrest control of the ground underneath the 1,331-room Row NYC Hotel from investor David Werner.

The bank, acting as the trustee for bond investors who hold the $275 million mortgage on the Midtown property, said in a lawsuit filed in Manhattan that Werner started missing payments on the loan in May 2020.
Werner owns the ground below the 28-story hotel at 700 Eighth Avenue with Deutsche Asset & Wealth Management.
The hotel portion itself is owned by Highgate Hotels, the Rockpoint Group and NorthStar Realty Finance. The entity that owns the hotel failed to make payments to Werner and is in default on its lease, according to the lawsuit.
Representatives for all the involved parties did not immediately respond to requests for comment.

The Row is the fifth-largest hotel in the city. It has had to look beyond tourism and business travel to fill rooms: Mayor Eric Adams’ administration was considering using part of it as an intake center and shelter for up to 600 migrant families, the New York Post reported in August.
The city’s hotel sector overall has been recovering from the pandemic. Hotel data company STR reported New York City occupancy at roughly 83 percent in June.
But some properties have struggled.
Steve Witkoff and Ian Schrager’s downtown Public Hotel defaulted on its $189 million mortgage earlier this year. A partnership between Madison Realty Capital and Newbond Holdings is acquiring the non-performing loan and plans to restructure the debt.
Toby Moskovits and Michael Lichtenstein’s Williamsburg Hotel is being sold out of bankruptcy. And the 452-room Edition Hotel in Times Square fell into foreclosure with a lender group led by Natixis taking over in January.
 
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