Hotel owners and operators are starting to pick their shots as the COVID vaccine era begins to send leisure, if not yet business, customers their way again.
That's the picture that is starting to emerge from recent property offerings, foreclosures and sales. Picking such play-for-keeps shots was impossible when the pandemic gripped the nation and region starting in March 2020.
Case in point: New York City-based Taconic Capital Advisors, a private equity operator that has in its portfolio the Courtyard By Marriott and TownePlace Suites on adjoining parcels on Engle Road in Middleburg Heights, is offering both for sale at an online Ten-X Capital auction on July 19.
Both have minimal asking prices, typical for auctions: $1.1 million for the 94-suite TownePlace property, and $2.7 million for the Courtyard. The properties were acquired in 2014 by the current ownership at prices of $6.8 million for the TownePlace and $14 million for the Courtyard.
Although the ownership has not been changed, the online advertising notes about the auction say the properties are lender-controlled and institutionally owned. However, Taconic has not offered at auction other properties it bought at the same time, such as identical TownePlace and Courtyard properties in Westlake built at almost the same time.
Mike Schlichtman, a director for the Paramount Lodging Advisors of Chicago, which is marketing the Taconic properties in Middleburg Heights, declined comment on the offering.
There may be good reason for shedding the properties in Middleburg, part of the region's airport market, and retaining its others.
The first whiffs of better times as vaccines and the economic recovery take hold may help other properties, though not the ones in the airport market.
David Sangree, president of the hotel consultancy Hotel & Leisure Advisors LLC of Lakewood, said in a phone interview that he believes the closing last year of the I-X Center in Cleveland signals a challenge for the airport market that will extend beyond the pandemic.
"With air travel beginning to improve, you can expect the airport market to improve over time," Sangree said. "However, with the closing of I-X as an event center, the future in that market is more uncertain and may affect demand for those properties."
Data from online hotel provider CoStar indicate the impact already is clear. Traditionally one of the region's strongest hotel markets, along with the Beachwood and eastern suburbs, the airport market's occupancy now is only a little better than the market as a whole, at 42% compared with 39% for all of Cleveland, according to CoStar.
Another case of picking shots is apparent closer to the airport.
That's where an affiliate of Ceres Enterprises of Westlake is pursuing the multimillion-dollar conversion of the former NASA DEB (Development Engineering Buildings) to a hotel and apartments. Meanwhile, less than a quarter-mile away, another Ceres-linked property, the Hilton Garden Inn Cleveland Airport on Emerald Parkway, on May 28 was sued for foreclosure by its lender after defaulting on payments due under a $14 million lender.
Clearly, a new hotel is worth more than one nearly 20 years old in the best of markets. And even more so in one of the worst in generations.
Two Fairfield-flagged hotels, in Avon and Beachwood, have gone into foreclosure, according to Cuyahoga County and Lorain County court records.
However, the biggest troubled hotel properties were in jeopardy before the pandemic, according to Trepp, a New York City-based reporting service that tracks securitized and other commercial mortgages.
Those are, respectively, the DoubleTree by Hilton in Beachwood, already lender-owned, and the DoubleTree downtown on Lakeside Avenue, which is pending in court in Cuyahoga County after the lender filed to foreclose in 2019.
In the end, the precipitous drop in demand during the pandemic so far has not pushed a plethora of hotels into the hands of lenders.
Sangree said that when the pandemic hit in spring 2020, no one in the industry knew how things would play out.
"We've found lenders have been more willing to be flexible than they were in 2008 (when the Great Recession hit)," Sangree said. "However, some owners are saying they are agreeing to pay fees to lenders for forbearance. But that does not mean they will not go into foreclosure later."
The other unexpected factor was the willingness of the Small Business Administration, first under former President Donald Trump and now under President Joe Biden, to provide Paycheck Protection Program (PPP) loans to keep employees on the job.
Multiple analysts say that has helped the industry avoid worse dislocation.
Another sign of the lodging market's slowly improving outlook is that some hotels are selling again, albeit at well-discounted prices.
To look at the bullish case for the hotel business, consider the viewpoint of Chris Patel, president of Itasca, Ill.-based NexGen Hotels. His company, through an affiliate, just bought the Four Points by Sheraton Cleveland Airport on West 150th Street.
NexGen paid $3.8 million for a six-story, full-service hotel that the seller paid $4.8 million for less than seven years ago.
"That property will be 70% occupied the next four days," Patel said in a phone interview, referring to June 17 through 21. "Activity has increased dramatically since leisure travelers are active again after getting COVID-19 vaccinations."
NexGen delayed the purchase of the Four Points for a year because of the pandemic's advent, he said. However, he felt strong enough about renewed activity to proceed with the deal, which NexGen bought at a big discount. He is less concerned about the demise of the I-X Center for events. He feels the bigger factor was the surge in new hotels downtown and regionally before the Republican National Convention in 2016, which saturated the market.
However, Patel pointed to the fundamentals of the Cleveland purchase, which bolstered his confidence during uncertain, though upward-trending, times.
"We paid less than $50,000 a key in that transaction," Patel said. "It's far less than replacement cost. We just finished a hotel in another city for $140,000 a key."
It may be several years before the Cleveland market fully recovers, he said, but it may be a hard deal for the company to ever surpass. But that's the kind of long-term view demanded in times like those the pandemic has produced in the region and nation.
"hotel" - Google News
June 20, 2021 at 03:00PM
https://ift.tt/3gID86Y
It's triage time in Northeast Ohio hotel business - Crain's Cleveland Business
"hotel" - Google News
https://ift.tt/3aTFdGH
https://ift.tt/2xwvOre
Bagikan Berita Ini
0 Response to "It's triage time in Northeast Ohio hotel business - Crain's Cleveland Business"
Post a Comment