Some of the region's most prominent hotels are more than three months late with their lenders, no fewer than three major greater downtown Detroit hotel building projects are bumping their start dates back due to the COVID-19 pandemic and one has temporarily halted construction completely amid cost overruns.
That's just some of the fallout the hospitality industry is facing locally, six months into a global health and economic crisis that halted travel and put the brakes on conventions and other business gatherings, dimming or muting revenue streams for the tens of thousands of hotel rooms across Metro Detroit.
While hotels have been performing better in recent months, the damage COVID-19 has wrought will continue to be long lasting on the $10 billion industry that employs 155,000 across 1,400 hotels, according to the Michigan Restaurant & Lodging Association.
Of course, the effects go far beyond bricks and mortar and into peoples' pocketbooks and financial livelihoods.
In a survey of its membership announced last week, the Washington, D.C.-based American Hotel & Lodging Association warned that half of hotel owners are in danger of mortgage foreclosure and nearly three-quarters would have to lay off more employees without additional federal government assistance.
That comes as more than two-thirds are at less than half of their full-time, pre-pandemic staff, according to the association, which also says that two-thirds report they can only last six more months on their current projected revenue and occupancies.
All that spells bad news for the hotel market in Detroit and its suburbs.
According to New York City-based Trepp LLC, which tracks commercial mortgage-backed securities, or CMBS, debt, there is $615.3 million in such loans out on hotel properties in the Detroit region. But of that, one-third, or $204.4 million, is more than 90 days past due.
That includes a pair of loans totaling $77 million for the Westin Book Cadillac in downtown Detroit, which is now in special servicing, as well as $35 million for the Townsend Hotel in downtown Birmingham — also in special servicing. A special servicer tries to come up with a debt resolution. The loan could be modified or extended, or some other deal could be reached with existing owners.
In addition, the revamped Trumbull and Porter Hotel in Detroit's Corktown neighborhood is more than three months behind on its $12.9 million loan, and the Delta Hotels by Marriott at Detroit Metropolitan Airport is also 90-plus days late on its $20.3 million loan, according to Trepp data.
Messages were left with the ownership and management groups of each of those four hotels; all four either declined to comment or didn't respond to inquiries from Crain's.
As of the week of Sept. 19, the region's hotel occupancy rate was 50.6 percent, still 18.5 percent below the 62.1 percent the week before the first COVID-19 cases were announced in Michigan, according to data provided by STR, a hotel-industry analytics firm with its North American headquarters in Tennessee. The Michigan Restaurant & Lodging Association says the profitability threshold for hotels is 50 percent occupancy; June 27-Aug. 22, hotels in Southeast Michigan were at or above 50 percent, according to STR.
The average daily rate, or ADR, continues to climb, back to $82.82, but is still 16.7 percent off the $99.38 the week of March 7, and RevPAR — industry lingo for revenue per available room — is back to $41.94, but 32 percent lower than the $61.71 reported the week before the first cases.
Yet all of those are vast improvements over the market lows in April. Occupancy was just 22.9 percent the week of April 4; the week of April 25, daily rates were $63.38 and RevPAR plunged to $14.88 the week of April 4.
In spite of the abundance of worries in the short term about performance in the hotel market, David Di Rita, principal of Detroit-based developer The Roxbury Group, which has two downtown hotels open and a third in the pipeline, said there's a reason there was a deluge of 2,000 or so rooms in the development hopper prior to the start of the pandemic.
"We are not wondering whether or not Detroit needs more hotel rooms at the other end of this. It will need more hotel rooms post-pandemic like it needed them pre-pandemic," he said. "The market will change, we know that. We are fortunately in a good position to wait that out. Other projects in the pipeline might not be."
Construction on no fewer than three hotels that are part of overall developments totaling at least $466 million have been slowed as a result of COVID. In addition, a $75 million hotel has halted construction as it attempts to secure more financing.
The biggest of them all, a proposed boutique 228-room Thompson Hotel in the $377 million development known as The Mid, has had its construction start date pushed back until at least June 2021, making the project about two years behind its initially announced schedule.
Representatives of the developer for the Midtown site north of Detroit's Whole Foods were not made available for an interview, but instead offered the following statement:
"The Mid's sponsor has been working on activating this site for the past two years with more than $27 million invested in the proposed development and we look forward to reengaging when we experience more market stability. We, too, are frustrated by the pause but remain bullish on Detroit and the commitments we have made and remain eager to break ground on this shovel-ready project in the spring/summer of 2021."
In addition, construction on the planned 227-room, $45 million The Godfrey hotel in Corktown has been bumped back about six months, said Randy Wertheimer, president and CEO of Farmington Hills-based Hunter Pasteur Homes, which is working on the seven-story planned building at 1401 Michigan Ave. with Chicago-based Oxford Capital Group.
Wertheimer said construction was to begin by the end of the year, and while the design and entitlement process is expected to be done by then, construction is likely to begin this summer instead.
"We have 40 percent equity in the bank," Wertheimer said. "At the time, it was easy getting a loan for 60 percent of our cost. That was the easy part of the deal. But because of COVID, the lending market now longer exists for hospitality today. Once the vaccine exists, we feel we'll be the only hotel in the country with 40 percent equity."
The $46 million AC Hotel by Marriott, which is being developed by Di Rita's The Roxbury Group, is now expected to begin construction in the first half of next year, as opposed to the end of the year, as most recently planned, he said.
"We are still moving forward," Di Rita said. He declined to comment on the two hotels his company has up and running: The David Whitney Building's Aloft Detroit and The Element at the Metropolitan Building, both downtown.
"We do have to get to the other side of the current environment to move forward on that," Di Rita said.
Construction at the $75 million Temple Detroit hotel at 640 Temple St. halted for three months as a result of Gov. Gretchen Whitmer's executive order pausing all nonessential commercial building, prompting cost overruns that require an additional layer of financing that is currently being finalized, according to a source familiar with the matter. Construction stopped while that financing is being secured but is expected to resume in a couple weeks.
The project is being developed by Byzantine Holdings LLC, which includes Christos Moisides, executive member of Detroit-based 400 Monroe Associates LLC; Gretchen Valade, granddaughter of Hamilton Carhartt, who founded Dearborn-based workwear brand Carhartt Inc. in 1889; and David Sutherland, partner with the Wakefield, Sutherland & Lubera PLC law firm in Grosse Pointe Farms.
Less noticeable but no less important to the market, eight hotels in the region are more than three months late on their CMBS loans, representing about one-third of the total CMBS balance, according to Trepp.
Damian Smoter, vice president on Bethesda, Md.-based special servicer CWCapital's RealINSIGHT Marketplace team, said in an interview earlier this month that about 15 percent of the company's auctions have been hotels (55 percent has been retail and 15 percent has been office, while the remaining 15 percent has been land, multifamily and industrial).
Among those behind on payments, according to Trepp: the 150-room Townsend Hotel in downtown Birmingham, now in special servicing after being more than three months late on a $35 million loan; the 453-room Westin Book Cadillac in downtown Detroit, which is also in special servicing after falling more than three months behind on a pair of loans totaling $77 million; the 144-room Trumbull and Porter Hotel in Detroit's Corktown neighborhood, which is more than three months late on $12.9 million in CMBS debt; and the 271-room Delta Hotels by Marriott — Detroit Metropolitan Airport hotel, which is more than three months behind on $20.3 million in CMBS debt.
Financial numbers for the Townsend during the pandemic were not available, but in the 12 months leading up to it, it had $21.96 million in revenue between April 2019 and March. In the calendar year 2019, revenue was $23.37 million and in 2018, revenue was $24.74 million. The most recent valuation in August 2017 pegs the property at $67.9 million.
Full annual financial data for the Westin Book Cadillac wasn't available through Trepp, but the hotel lost $2 million between January and April, with $19.76 million in revenue and $21.78 million in expenses. It operated that period at a 43 percent occupancy rate. The hotel is valued at $136 million, according to an appraisal conducted in November, four months before the pandemic hit Michigan.
The Trumbull and Porter hotel had $7.47 million in revenue and $5.64 million in expenses, for a net operating income of $1.83 million in the 12 months leading up to the COVID-19 pandemic's arrival in Michigan, according to Trepp. Full calendar year financial data was not available for the hotel, which was appraised in January 2019 at $23.4 million.
The Delta Hotels by Marriott also didn't have full calendar year financial data available, but in the 12 months between April 2019 and March leading up to the pandemic, it was already operating at a thin profit margin, pulling in $7.31 million in revenue on expenses of $6.84 million, according to Trepp.
But perhaps most telling number of all: In less than one year, the hotel lost one-third of its appraised value, falling from $33 million in October 2019 to $22 million in August.
"behind" - Google News
September 27, 2020 at 11:06AM
https://ift.tt/30e1ooN
Hotels fall behind on debt, delay building projects in long-term pandemic squeeze - Crain's Detroit Business
"behind" - Google News
https://ift.tt/2YqUhZP
https://ift.tt/2yko4c8
Bagikan Berita Ini
0 Response to "Hotels fall behind on debt, delay building projects in long-term pandemic squeeze - Crain's Detroit Business"
Post a Comment