Heartbreak hotel: mortgage bonds weather New York’s hospitality crisis
The turning of the leaves in Manhattan should also mean a windfall for hotels, as tourists from around the world flock to witness a New York City of cinematic proportions — the Macy’s Thanksgiving parade, window-shopping along Fifth Avenue, the tree at Rockefeller Center.
But all that will have to wait for now, perhaps until next year as a coronavirus vaccine breakthrough by Pfizer and Germany’s BioNTech offers a glimmer of hope just in time for the holidays.
In the meantime, “no vacancy” signs across New York’s 640 hotels collect dust, with four out of five properties underpinning commercial mortgage bonds now feeling the strain of the crisis, and investors fretting over whether hoteliers will be able to repay loans.
“Realistically we aren’t going to see any improvement until the second quarter . . . The industry is really bleeding. It’s not just on life support, it’s comatose,” Vijay Dandapani, chief executive of the Hotel Association of New York City, told the FT’s Joe Rennison.
A 50 per cent survival rate of the city’s hotels would constitute a “great” outcome, he added. Commercial mortgage-backed securities data company Trepp categorises 37.7 per cent of all New York hotels on its watchlist, designed to warn investors before a mortgage is transferred to debt collectors known as special servicers.
And that’s only half the story — add the number of hotels whose mortgages have gone to debt collectors, and roughly 4 out of 5 hotels in CMBS deals are in hot water.
Among ailing properties is the Trump International Hotel at 1 Central Park West, whose $6.5bn mortgage was added to Trepp’s list following a substantial drop in income, adding to the US president’s $1.1bn debt pile due to the Covid-stricken real estate market.
Some beleaguered hotels, like The Lucerne in Manhattan’s Upper West Side, have been repurposed as shelters by the city’s Department of Homeless Services, a programme that polarised the local community. Participating hotels were paid $174 a night per room, according to The New York Times.
As New York veers “dangerously close” to a second wave of the virus, the streets of Midtown and Times Square ought to remain less congested than usual in the months to come.