Soho Properties, the owners of the Margaritaville Resort Times Square Hotel in New York City, filed for chapter 11 bankruptcy protection in what Forbes describes as a “last-ditch effort” to avoid a foreclosure auction that had been scheduled for Monday. after Soho Properties failed to pay its debt after losing money on the hotel since its opening.
According to Crain's New York, Soho Properties' executive vice president, Sethian Pomerantz, filed the petition on Sunday in federal bankruptcy court for the Southern District of New York. The lawsuit was meant to prevent the foreclosure auction, but a judge ruled against it in that case, leading to the bankruptcy filing, according to court documents.
Soho Properties reportedly is looking to refinance the hotel’s $167 million mortgage and re-negotiate the property’s $309 million debt with its mezzanine lenders. Crain’s noted the property could have as many as 49 creditors, along with assets and liabilities between roughly $100 million and $500 million.
When asked for comment, Margaritaville Chief Investment Officer Evan Laskin said that the filing would not “impact resort operations” and that the property would remain open and staff members would remain employed. “The resort continues to perform well, with outstanding satisfaction ratings,” Laskin said in the emailed statement. “Margaritaville looks forward to delivering fun and escapism through the resort and restaurant experiences for guests and New Yorkers for a long time.”
By the Numbers
In the bankruptcy filing, Pomerantz said that appraisers valued the hotel between $266 million and $350 million two months ago, according to Bloomberg. The property opened in July 2021 while hotel occupancy across the city (and in general) was still well below normal due to the pandemic. At the time, occupancy nationwide was 65.4 percent, average daily rate was $135.35 and revenue per available room was $88.51, according to STR. In comparison, two years later, occupancy has reached 69.9 percent, ADR is $156.27 and RevPAR is $109.18. According to a report from PwC earlier this year, RevPAR in Manhattan hotels increased 54.2 percent year over year during the fourth quarter of 2022. With overall occupancy for the quarter at 82.7 percent and ADR at $376.37, Manhattan RevPAR jumped from $201.90 in Q4 2021 to $311.23 in Q4 2022.
As hotel metrics have gotten better nationwide over the past two years, Pomerantz claimed the Times Square property’s revenues also have been “improving” and are projected to exceed $25 million by the end of 2024—if and when retail space in the hotel is leased.
“Given the projections for future income, the appraised value of the Hotel, and the solid location in Times Square where tourism is reviving, the Debtor believes that a refinancing of the Hotel can ultimately be achieved within a reasonable period of time,” Pomerantz wrote in a sworn declaration filed to the court.