The BroadsheetDAILY ~ 1/19/21 ~ Downtown Hotelpocalypse Continues as Two Hostelries in FiDi Go to Auction After Loan Default

Inn-plosion

Downtown Hotelpocalypse Continues as Two Hostelries Go to Auction After Loan Default

Above: 126 Water Street Below: 51 Nassau Street

A pair of Lower Manhattan hotels will be auctioned off to the highest bidder on Thursday, after the holding company that owns the properties was unable to keep current on $385 million in debt.

In a story first reported by the Real Deal, the 113-room Holiday Inn at 51 Nassau Street (between Liberty Street and Maiden Lane) and the 112-unit Holiday Inn Express at 126 Water Street (between Wall and Pine Streets) are part of a seven-property portfolio owned by a joint venture between Hersha Hospitality Trust and a Chinese investment firm, Cindat Capital Management. (The other five hotels owned by the partnership are in Midtown.)

Two years ago, these partners refinanced existing loans for their portfolio, with a new $300-million mortgage, plus $85 million in additional financing. The pair of Lower Manhattan hotels were opened in 2008 and 2010, as part of the rapid proliferation of new hospitality facilities Downtown, during the community’s recovery from the terrorist attacks of September 11, 2001.

In the 2018 lending package, the Nassau Street property secured $28.1 million in collateral, while the Water Street hotel backed up another $26.6 million, according to a credit review from Standard & Poor’s Global Ratings.

This analysis warned that the loan-to-value ratio for the package was a “highly leveraged” 151 percent. (This is the equivalent of trying to buy a condominium priced at $1 million with no money down, and asking the bank to give you a mortgage of $1.51 million.)

In what may have been a sign of impending trouble, the review further observed that the hotel operators were leasing approximately ten percent of the rooms at these hotels to the City’s Department of Homeless Services, for use as ad-hoc shelter space.

In another vein, the same report noted that, “hotel guest room supply has increased significantly in Manhattan since 2009 [with] 160 new hotels opened in Manhattan between 2009 and 2016, reflecting a guestroom increase of 23,305, or 33 percent.”

The Standard and Poor’s analysts might additionally have noted (but did not) that during this same period, hotel-room inventory in Lower Manhattan was growing even faster than in the borough as a whole. In the years leading up to the terrorist attacks of September 11, 2001, visitors wishing to stay in Lower Manhattan had essentially four choices: the Marriott World Trade Center Hotel (destroyed when the Twin Towers collapsed), the Marriott World Financial Center Hotel (now known as the Marriott Downtown, on West Street), the Millennium Hilton Downtown Hotel (on Church Street, opposite the World Trade Center complex), and the boutique Wall Street Inn on South William Street.

By 2020, there were 37 hotels operating in the square mile below Chambers Street, offering more than 7,900 rooms, according to the 2019 Lower Manhattan Real Estate Year in Review, a report from the Downtown Alliance. The same analysis indicated that another 15 hotels, containing an additional 2,000 rooms, were under construction or in the planning stages as of the start of 2020.

Even before the national and local economies stalled, as a result of the pandemic coronavirus, the hotel business in Lower Manhattan had begun to show signs of impending trouble. The Ritz-Carlton Battery Park (at Two West Street) opened to much fanfare in 2002, but was never able to turn a profit. Sold to a new operator in 2018, its name was changed to the Wagner. (The current owner is hoping to exit the hotel business entirely, by seeking permission to convert the structure into apartments.)

Subsequently, the Andaz Hotel (at 75 Wall Street) was put up for sale by its owner, the Hakimian Organization. The building is now being shopped to developers based not on its value as a hotel, but instead for its potential to convert into office or residential use.

But all of these harbingers came before every hotel in Lower Manhattan (and most throughout New York City) were shut down as part of the social distancing and quarantine measures aimed at limiting the spread of COVID-19. In the months that followed, many local hotels were commandeered for other uses: the City used the Radisson New York Wall Street Hotel (located at the corner of William and Pine Streets) to house homeless people quarantined because of possible exposure to the disease. And the Conrad Hotel in Battery Park City (located in Battery Park City, at 102 North End Avenue) was being used to house healthcare personnel who volunteered to come to New York and aid in the fight against the pandemic.

While some local hotels have now partially reopened, many appear unlikely ever to recover. And even after the health crisis recedes, a significant (and prolonged) financial downturn is widely expected to remain. If this contraction jolts the hospitality industry as similar episodes have in decades past, at least some of the dozens of hotels recently built in Lower Manhattan will not reopen their doors. Among these are the AKA Wall Street Hotel (located at 84 William Street), the W New York Downtown (on Albany Street), and the Suites by Sonder (on John Street), all of which have closed their doors permanently. And others, currently under construction, may never welcome their first guests.

What might become of these structures remains unclear. It is possible (although expensive) to convert hotels into apartment buildings, but a twin glut of residential development is also cresting in Lower Manhattan at the same time.

But it is also possible that challenges facing the local hotel industry may yet create opportunity for community leaders who have long bemoaned the critical shortage of affordable housing in Lower Manhattan. If even a significant fraction of the Downtown’s inventory of almost 8,000 existing rooms (along with 2,000 more in the planning stage) were to be converted for residential use, this process would likely create several thousand of new apartments. A campaign to enact incentives (such as tax credits) for developers to set aside at least some of these units as affordable dwellings could mitigate some of pricing pressure suffered by longtime residents in recent years.

By last May, the Hersha/Cindat partnership had fallen behind on payments for the $300 million loan it had taken out in 2018. In September, possibly sensing further trouble ahead, Cindat tried to sell, for around $400 million, its stake in the seven-hotel portfolio. (The firm had paid $571 for its share in 2016.) But when no takers appeared, the $85 million portion of the loan package also fell into default, which led to the auction scheduled for Thursday.

Matthew Fenton

CALENDAR

Tuesday January 19

6PM

Community Board 1 Waterfront, Parks & Cultural Committee

 Live Remote Meeting – https://live.mcb1.nyc

AGENDA

1) Hudson River Park – Update by Carrie Roble, Vice President, River Project and Rashi Puri, Assistant Vice President, Real Estate and Planning, Hudson River Park Trust

2) Bogardus Plaza – Report by Paul Goldstein, Chair, Waterfront, Parks & Cultural Committee

6PM

Skyscraper Museum

In this new book, The Structure of Skyscrapers in America, 1871–1900, historian and structural engineer Donald Friedman presents a thorough history of the development of high-rise buildings, not only in New York and Chicago but across the country in the last decades of the nineteenth century. Providing a rich historical context for the emergence of the skyscraper, he details the range of the technical aspects of the construction of this new building type. Free.

7PM

China Institute

Travel live with us to Guangdong, to explore the rise of one of the most important sustainable agriculture movements on the planet. Here in the heart of China’s Pearl River Delta, entrepreneurs are working to rebuild social trust between farmers in China’s countryside and the huge populations of its rapidly growing cities. As urban dwellers are expressing renewed interested in tradition while prioritizing food safety and health, new businesses are springing up to meet the growing demand. Meet the digital innovators and social entrepreneurs who are working to strengthen rural communities, promoting sustainable agriculture, and bringing food from farm to table in China today. Free

Happy Trails

Newly Completed 750-Mile Bikeway Begins in Battery Park City

Lower Manhattan latest landmark—the southern terminus of the longest multi-use state trail anywhere in the United States, marked by a new kiosk along the bikeway that runs parallel to West Street, near Battery Place—was unveiled on New Year’s Eve.

This is the starting-point of the Empire State Trail, an initiative announced by the administration of Governor Andrew Cuomo in 2017, the final missing link for which—a 23-mile section between Brewster and Poughkeepsie, in the Hudson Valley—was opened to the public in December.

Lunch in Wagner Park (video)

Community Gathers at the Doors of the Museum of Jewish Heritage to Condemn Racist Symbol

Yesterday afternoon, community members and elected officials joined with students, parents, and teachers from the Battery Park City School (PS/IS 276) in front of the Museum of Jewish Heritage – A Living Memorial to the Holocaust to forcefully condemn the Confederate flag that was found tied to the museum’s doors last week.

“When our neighbors experience an act of hate, we stand with our neighbors,” said PS/IS 276 teacher Mary Valentine.

 She introduced principal Terri Ruyter, who read a letter that teachers had written as an expression of solidarity with their museum colleagues. In part, the letter said that the appearance of the Confederate flag, a symbol of white supremacy, was “an attack on all of us who stand for justice, peace and anti-violence.”

Four Walls for a Few Months Longer

State Extends, Expands Eviction and Foreclosure Bans Credited with Saving Thousands of Lives

The State legislature has enacted, and Governor Andrew Cuomo has signed, a measure designed to provide relief for rental tenants and homeowners experiencing financial hardship as a result of ongoing pandemic coronavirus.

At a special session on December 28, the State Senate’s Democratic majority opened a special session to ratify the the COVID-19 Emergency Eviction and Foreclosure Prevention Act. The measure, which had been passed earlier by the State Assembly, was signed into law on the same day by Mr. Cuomo.

Whatever Floats Your Boat

During Pandemic and Revenue Shortfall, City Hall Prioritizes Plans for New Ferry

Amid a massive budget crunch that may require laying off several thousand City employees and slashing services, the administration of Mayor Bill de Blasio has nonetheless found room in municipal coffers to move ahead with plans for a new subsidized ferry that will connect Staten Island with Battery Park City, and Midtown.

Construction began in December at the Staten Island site of a new landing for the planned service, which was originally slated to begin running before the close of 2020, but has now been pushed back to the summer of this year, due to logistical complications caused by the ongoing pandemic.

Lower Manhattan Unchained

Questions about What’s In Store for Local Retail Point to Glum Answer: Not Much

Small businesses aren’t the only ones hurting in Lower Manhattan. Large national retailers are also shuttering their local stores in record numbers, according to a new report from the Center for an Urban Future (CUF), a public policy think tank that uses data-driven research to bring attention to overlooked issues. The analysis documents that the number of chain stores in Lower Manhattan decreased dramatically during the past 12 months, with a total of 63 national retailers shutting their doors permanently.

Adit Up

Architects Propose to Reclaim Park Tribeca Lost Nearly a Century Ago

Community Board 1 (CB1) is supporting a plan to create a new park in Tribeca, within the Holland Tunnel Rotary, the six-acre asphalt gyre of exit ramps that connects traffic from New Jersey to Lower Manhattan’s street grid.

The husband-and-wife architecture team of Dasha Khapalova and Peter Ballman are proposing to create a constellation of small, street-level parks at the corners of the complex (bounded by Hudson, Laight, and Varick Street, as well as Ericson Place) which will double as entry points for a new, submerged central plaza. This plaza is anachronously known as St. John’s Park, although it has not been a publicly accessible space since the Holland Tunnel opened, 94 years ago.

CLASSIFIEDS & PERSONALS

Swaps & Trades, Respectable Employment, Lost and Found

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TODAY IN HISTORY

January 19

1937 – Howard Hughes sets a new air record by flying from Los Angeles to New York City in 7 hours, 28 minutes, 25 seconds.

1419 – Hundred Years’ War: Rouen surrenders to Henry V of England, completing his reconquest of Normandy.

1818 – French physicist Augustin Fresnel submits a “supplement” which establishes the current understanding of polarized light.

1853 – Giuseppe Verdi’s opera Il trovatore receives its premiere performance in Rome.

1861 – American Civil War: Georgia joins South Carolina, Florida, Mississippi, and Alabama in declaring secession from the United States.

1883 – The first electric lighting system employing overhead wires, built by Thomas Edison, begins service at Roselle, New Jersey.

1920 – The United States Senate votes against joining the League of Nations.

1920 – The American Civil Liberties Union (ACLU) is founded.

1937 – Howard Hughes sets a new air record by flying from Los Angeles to New York City in 7 hours, 28 minutes, 25 seconds.

1940 – You Nazty Spy!, the very first Hollywood film of any kind to satirize Adolf Hitler and the Nazis premieres, starring The Three Stooges, with Moe Howard as the character “Moe Hailstone” satirizing Hitler.

1953 – Almost 72% of all television sets in the United States are tuned into I Love Lucy to watch Lucy give birth.

1977 – President Gerald Ford pardons Iva Toguri D’Aquino a.k.a. “Tokyo Rose”

1978 – The last Volkswagen Beetle made in Germany leaves VW’s plant in Emden. Beetle production in Latin America continues until 2003.

1983 – The Apple Lisa, the first commercial personal computer from Apple Inc. to have a graphical user interface and a computer mouse, is announced.

1986 – The first IBM PC computer virus is released into the wild. A boot sector virus dubbed (c)Brain, it was created by the Farooq Alvi Brothers in Lahore, Pakistan, reportedly to deter unauthorized copying of the software they had written.

Births

1807 – Robert E. Lee, American general and academic (d. 1870)

1809 – Edgar Allan Poe, American short story witer, poet, and critic (d. 1849)

1839 – Paul Cézanne, French painter (d. 1906)

1907 – Briggs Cunningham, race car driver, sailor, and businessman (d. 2003)

1908 – Ish Kabibble, American comedian and cornet player (d. 1994)

1930 – Tippi Hedren, American model, actress, and animal rights-welfare activist

1939 – Phil Everly, singer-songwriter and guitarist (d. 2014)

1943 – Janis Joplin, American singer-songwriter (d. 1970)

1953 – Desi Arnaz, Jr., American actor and singer

1954 – Cindy Sherman, American photographer and director

Deaths

520 – John of Cappadocia, patriarch of Constantinople

1957 – József Dudás, Romanian-Hungarian activist and politician (b. 1912)

1975 – Thomas Hart Benton, American painter and educator (b. 1889)

1981 – Francesca Woodman, American photographer (b. 1958)

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