In the latest sign of the tumult unnerving the city’s hospitality industry, New York City’s largest hotel owner has split with one of its senior executives.
Neil Luthra recently left Highgate Hotels, where he was a principal in charge of running the day-to-day business operations of the hotel giant, sources told The Real Deal.
Luthra did not respond to a request for comment and a spokesperson for Highgate declined to comment.
The circumstances of Luthra’s departure were not entirely clear, but at least one person with knowledge of the situation said the split was acrimonious. His exit is likely the most significant executive shakeup to hit a major hotel player during the pandemic, which has devastated the city’s hospitality industry.
Highgate is New York City’s largest hotel owner and operator, running both its own portfolio of properties and managing hotels for others. As such, its hit from the pandemic has been magnified.
The company has a portfolio spanning more than 100 properties including the massive, 1,331-room Row Hotel in the Theater District, the trendy boutique James-branded hotels in Nomad and Soho and the Park Lane Hotel on Central Park South.
Luthra had been a principal at the real estate private equity firm Westbrook Partners when he left in 2010 to join Highgate, which had built itself into a hospitality powerhouse since its founding in 1998 by brothers Mahmood and Mehdi Khimji.
When Luthra came on board, Highgate had been selling off New York properties and expanding in other markets. But Luthra oversaw an ambitious expansion in New York as the company spent hundreds of millions of dollars snapping up properties as competitors wary of an overheated sector sat on the sidelines.
During Luthra’s tenure, Highgate’s acquisitions included the Park Lane Hotel in 2013 for $650 million with a partnership led by the Witkoff Group, Howard Lorber’s New Valley and Macklowe Properties; the Manhattan Times Square for $275 million; and the Affinia Manhattan, since rebranded as the Stewart Hotel, for $217.5 million.
The company also invested outside hospitality. In 2013 it purchased the trophy office and retail tower at 650 Madison Avenue for $1.3 billion alongside Vornado Realty Trust, Crown Acquisitions and Oxford Properties Group.
But even before the pandemic, the city’s hotel industry had been struggling after a hotel-building boom flooded the city with thousands of new rooms and pushed rates down.
And Highgate felt the pain.
The company’s massive Row Hotel, for example, has been in default on its $260 million mortgage with lender Colony Credit since 2018. Highgate, which purchased the leasehold on the property with the Rockpoint Group in 2010 for $200 million, had tried to sell the property last year, but found no takers.
The coronavirus only exacerbated the industry’s problems.
Highgate, like many lodging companies, has had to deal with a huge drop in demand, shuttered hotels, layoffs, infighting with partners and negotiating with lenders for mortgage relief.
Even with many New York City hotels closed, occupancy for the open ones stood at just 41 percent in mid-August after months of slow recovery, according to STR. That figure was 54 percent off from a year earlier.
Since the city went into virtual lockdown in March, hotels have shut their doors and let thousands of workers go. Many hospitality properties got a momentary reprieve from the federal government’s Paycheck Protection Program, which allowed them to pay staff for a short time.
But many hotels that brought back staff using PPP funds had to close again when the money ran out. Some hotels were able to salvage some business by renting rooms to emergency first responders who flocked to the city in the early days of the pandemic. A number then found a stream of revenue by renting rooms to the city as temporary shelter for the homeless.
But the long-term picture for the city’s hotel industry looks bleak. In June, the Broadway League announced the theater industry will not get back to work in 2020. Earlier this month, organizers for the Radio City “Christmas Spectacular” cancelled the popular show for its first time in its nearly 100-year history. And the cash-strapped de Blasio administration is preparing to move homeless people back to regular shelters.
The holiday season from Thanksgiving through the end of the year is usually the busiest time of the year for hotels, and entertainment attractions are a huge draw for tourists. For many, the high-profile cancellations dashed hopes that the city’s hotels would enjoy a recovery at the end of the year.
Contact Rich Bockmann at [email protected] or 908-415-5229