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'The Shining' meets New York hotel market

From the August issue: In Stanley Kubrick's cult classic film "The Shining," a once-luxurious hotel paradise turns out to be a house of horrors that's nearly impossible to escape.

Right now, it seems that New York's hotel investment sector is having its Shining Moment. The hundred or so hotels developed during the last few years are beset by murderous debt levels, credit markets that prevent easy escape via refinancing and the specter of Depression-like economic troubles.

"For the first half of the year, people were hoping we would recover, or they could work out deals with the lenders," said Bradley Burwell, a senior associate in CBRE's Capital Markets Group for hotels. "May killed that hope, and June was not much better — and it's finally gotten to the point where borrowers have run out of money."

Though only one high-profile Manhattan hotel has become delinquent this year (the Dream Hotel at 210 West 55th), signs of distress are mounting. Burwell estimates that by the end of the third quarter — a full year into the accelerated economic downturn — more than half of New York City hotels will be in technical default on their loans, meaning the debtor has violated terms of the loan such as a minimum working capital requirement.
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