Hotel developers are hoping the New York City Capital Resource Corp. will be the financing source of last resort for city projects that are either stalled or haven’t started due to the credit crunch.
The CRC will issue the city’s $121 million allocation of recovery zone facility bonds, a new type of tax-exempt private activity bond created under the American Recovery and Reinvestment Act.
In June, the CRC designated recovery zones as areas in the city that were already designated for subsidy programs including New York State empire zones, federal empowerment zones, highly distressed areas as defined by state statute, and distressed areas eligible for the federal new markets tax-credit program.
Hotel projects account for 13 of the 30 applications for recovery zone bonds listed on the Web site of the New York City Economic Development Corp., a quasi-public corporation that oversees economic development in the city and is affiliated with the CRC. David Lombino, spokesman for the EDC, responding to questions submitted in writing, said there were no restrictions on the types of commercial projects eligible, provided that they were in a mapped recovery zone, shovel-ready and feasible. To date, the CRC has approved $35 million of the bonds.
For Steven Ancona, president of Flatiron Real Estate Advisors LLC, the possibility of using tax-exempt bond financing to build Greenhouse 26, a 19-story “eco-chic” boutique hotel at 132 West 26th Street would provide a happy ending to a year of frustration after financing commitments for the project collapsed.
Lenders have “pretty much lost the appetite to make any kinds of loans,” Ancona said. “We’ve had broker introduce us to broker and it’s pretty much been the mantra at most banks that they are absolutely not doing construction lending.”
Ancona said they hope to get approved to use about $12 million of recovery zone bonds and begin construction.
“It’s difficult to get any kind of financing in New York City,” said Steven Spinola, president of the Real Estate Board of New York, a trade group. “Hotels in New York City, they’re doing okay in terms of occupancy rates, but the prices have gone down dramatically over 18 months.”
Lower room prices makes it more difficult to secure financing because lenders look at the projected ability to pay the loan based on today’s rates, he said.
According to data from PKF Consulting, a hospitality industry research firm, the average room rate in New York for the first seven months of 2009 was $214.68 a night and the occupancy rate was 77.7%. This is down from $287.09 a night and 85.8% occupancy during the same period last year.
All but two of the hotel projects seeking recovery zone bond funding are in Manhattan, including some luxury hotels in the city’s hottest neighborhoods.
The developers of the stalled 180 Ludlow Street in Manhattan’s Lower East Side is seeking financing for its 19-story hotel. S&H Equities (NY) Inc., a real estate firm in Great Neck, is developing the project.
The developers of the Mondrian Hotel at 150 Lafayette Street in SoHo are seeking bonds for their 270-room luxury hotel. The bond applicant, Sochin Downtown Realty Inc., is affiliated with Cape Advisors Inc., which is developing the project with Morgans Hotel Group.
On the edge of the meatpacking district, developer Charles Blaichman’s CB Developers plans to convert an existing three-story building at 345 West 14th Street into an 11-story hotel with hotelier Andre Balaz Properties.
Affiliates of Magna Hospitality Group LC, a Rhode Island-based hotel real estate firm, are seeking financing to build hotels at 505-513 West 43rd Street, 231 East 43rd Street, and 60 West 36th Street in Manhattan. They also seek financing for a hotel on Flatbush Avenue in Brooklyn near the proposed Atlantic Yards development.
Northquay Properties LLC, a company affiliated with hotelier Vikram Chatwal’s Hampshire Hotels & Resorts LLC is seeking bonds for hotel in the meatpacking district.
Dermot BMB LLC, which is affiliated with the Dermot Co., applied for bonds to finance construction of a hotel on top of the historic Battery Maritime Building at the foot of Manhattan in financial district.
Jiten LLC, a company affiliated with Jiten Hotel Management, Inc. a Massachusetts-based firm that owns and operates hotels in Georgia, Massachusetts, New Hampshire, New York and Rhode Island, applied for bonds to finance a hotel in the Bronx. The company 125 Property Interests LLC, an affiliate of Reisman Property Interests, LLC, is seeking bond financing for a hotel in Harlem. IS Development LLC applied for bonds to develop a hotel in Manhattan.