Tallying crisis’ toll on MRR Development’s Hotel Indigo

Unlike many New York hotels, Hotel Indigo Lower East Side has kept its doors open during the coronavirus pandemic. But new financial disclosures show the last few months have cut deeply into the MRR Development-owned property.

In March, following the shutdown of bars and restaurants across the state, the hotel furloughed 80 percent of staff, according to the company’s first quarter earnings report published Wednesday on the Tel Aviv Stock Exchange. And while the hotel has insurance that covers pandemics, it’s unclear what the payout will be.

Late last month, MRR also returned a $1.7 million forgivable Paycheck Protection Program loan for the hotel, after government guidance indicated that firms with other sources of capital may not be eligible. The hotel is managed by Intercontinental Hotel Group.

An appraisal of the hotel included with Wednesday’s report notes occupancy fell to 26.4 percent in March, with an average daily rate of $176.23 and RevPAR of $46.50. That underperformed its “competitive set” of six other hotels in the area. The rate, however, was still far above the average occupancy for New York City hotels around that time, which was just over 15 percent, according to hospitality data firm STR.

Occupancy rates at hotels in New York and across the country have slowly risen from that March low, as many — including the Indigo — have begun renting rooms to essential workers, and some staff have been brought back accordingly.

The appraisal values the Indigo at $154.4 million, a 5 percent discount from its purchase price in 2018 — with the caveat that determining the market value of a hotel under current market conditions is a major challenge.

MRR Development — owned by Rotem Rosen and Indian billionaire Anand Mahindra — expects to see a roughly $600,000 loss at the hotel for the month of April, according to the earnings report. The appraiser projects that net operating income at the property for the 12 months starting this April will be just $2.3 million, a big drop from the hotel’s strong performance in 2019, when NOI exceeded $10 million for the first time.

The appraiser’s assessment is based on the extraordinary assumption that “NYC restaurants and bars will be reopened in June 2020 with restrictions on occupancy,” the report notes. Those are now open only for takeout and delivery, and the food and beverage services at the Indigo are closed.

The assessment also excludes potential insurance proceeds, as the Indigo “has a business interruption insurance policy through its affiliation with IHG Hotels” that covers pandemics, although the size of the payout has yet to be determined. However, not all IHG hotels have insurance that covers pandemics.

Rosen declined to comment, citing securities regulations.

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