Sapir Corp Q1 Earnings Highlight Challenges For NYC Hotels

As the coronavirus crisis led many New York City hotels to close their doors, some properties have managed to boost their occupancy with government contracts to house frontline workers and others in need of housing.

For the rest, business has been dismal.

The situation at Sapir Corp.’s 264-key NoMo Soho hotel at 9 Crosby Street is a striking example. As revealed in the Alex Sapir-led company’s latest quarterly earnings report, the hotel had an occupancy rate of just 1.9 percent in April, at the height of the pandemic. It had an average daily rate of $166.76 and its revenue per available room was just $3.12, according to an appraisal. This contributed to a roughly $1.5 million operating loss for the first quarter.

The appraiser projected that occupancy would rise to 2 percent in May and 5 percent in June, before jumping to 30 percent in July and eventually ramping up to pre-coronavirus levels by year end.

“NoMo Soho has remained fully open for traditional hotel use throughout the pandemic and our occupancy numbers are in line with other hotels across the city that similarly remained open but did not receive government contracts,” a Sapir Corp. spokesperson said, noting that the hotel had participated in the bidding processes for military and health care housing contracts, but was not selected.

“In the meantime, we’ve worked with management to reduce operating costs and identify ways to increase revenue,” he said.

On Tuesday, Sapir Corp. also announced the launch of a workspace program known as YourPlace. “As demand in the hotel and office industry continues to shift during the pandemic, we’re looking to stay ahead of the curve and provide New Yorkers with a private, serene environment where they can experience distraction-free luxury,” Sapir Corp. CEO Amir Richulsky said in a statement announcing the program.

In late April, as hotel occupancies in the city rose to an average of 33.3 percent, an executive with STR, the hospitality data firm that tracks the numbers, cautioned that “this is not any type of early-recovery sign.” Jan Freitag added that “more demand can be attributed to frontline workers.” On Tuesday, Freitag said that single-digit occupancy rates were not uncommon for upper upscale New York hotels back in April.

Overall occupancy figures have also been boosted by the fact that many hotels have simply closed, removing their supply from the calculation. As the recipient of a $2.9 million federal Paycheck Protection Program loan, Sapir Corp. is obligated to maintain payroll near pre-coronavirus levels. Recent changes to the PPP program have extended the period during which these funds can be spent while remaining eligible for loan forgiveness.

The senior lender on the NoMo Soho, Goldman Sachs, consented to the PPP loan and provided a three-month deferral on interest and other payments in exchange for a personal guarantee from Alex Sapir, according to the earnings report.

After being shut down in the early days of the pandemic, the hotel’s restaurant began offering takeout service on May 22, allowing it to bring back some kitchen staff.

Contact Kevin Sun at ks@therealdeal.com