"Last straw" for NYC hotel industry?

David Goldsmith

All Powerful Moderator
Staff member
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

All Powerful Moderator
Staff member

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

All Powerful Moderator
Staff member


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

All Powerful Moderator
Staff member

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

All Powerful Moderator
Staff member
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

All Powerful Moderator
Staff member

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

All Powerful Moderator
Staff member
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

All Powerful Moderator
Staff member

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.
 
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