More NYC hotel loans are defaulting as room rates fall

A report also found at least 21 CMBS mortgages backed by New York hotels are watchlisted for potential difficulties

New York /
Feb.February 18, 2020 09:50 AM
From left: The Row Hotel at 700 8th Avenue, the Williamsburg Hotel at 96 Wythe Avenue, the Selina Hotel at 516-518 West 27th Street and 20 Times Square (Credit: Google Maps, Sumaida + Khurana, PBDW)

From left: The Row Hotel at 700 8th Avenue, the Williamsburg Hotel at 96 Wythe Avenue, the Selina Hotel at 516-518 West 27th Street and 20 Times Square (Credit: Google Maps, Sumaida + Khurana, PBDW)

New York City has seen a spate of high-profile hotel loans go into default in recent months, and challenging market fundamentals certainly aren’t helping.

The average daily room rate for New York hotels dropped to $255.16 last year — the lowest point since at least 2013 — the Wall Street Journal reported, citing data from STR. And with more than 22,000 hotel rooms in the pipeline, that figure is set to weaken further.

A $260 million loan on the 1,331-room Row Hotel near Times Square has been in default since 2018, and lender Colony Credit recently tapped a brokerage firm to sell it for as little as $50 million, sources told the Journal. The Highgate-led partnership that owns the leasehold on the hotel put the property on the market last year, but did not attract much interest.

Colony cited a “significant deterioration” in the New York hotel market and “feedback from the sales process” as reasons for the drastic writedown in the value of the Row Hotel loan.

Elsewhere in the city, Toby Moskovits’ Heritage Equity Partners defaulted on a $68 million loan for the Williamsburg Hotel last year, and the property is headed to receivership — although the landlord and lender have now been wrangling for months over specifics of the receivership agreement.

In December, French bank Natixis filed to foreclose on a $650 million portion of the $2 billion financing package at Maefield Development’s hotel project at 20 Times Square. Earlier this month, East West Bank moved to foreclose on loans secured by the Selina Chelsea, whose operator counts WeWork co-founder Adam Neumann among its backers.

And last month, hotelier Richard Born chose to shut down the Blakely Hotel altogether, citing challenges facing the hotel industry, and denying a connection with the decision by the hotel’s employees to unionize.

According to Trepp, at least 21 CMBS mortgages backed by New York hotels are currently watchlisted for potential difficulties. [WSJ] — Kevin Sun

 

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