Williamsburg Hotel Nears $76M Refi to Cure Loan Default
The owners of the Williamsburg Hotel in Brooklyn are lining up a $76 million refinancing from CREMAC Commercial Finance, sources close to the deal have told Commercial Observer.
And the deal comes just in the nick of time. The property, at 96 Wythe Avenue in Williamsburg, failed to pay off its bridge loan on time on June 9, according to Kroll Bond Rating Agency, which is tracking the delinquent debt.
CREMAC’s refinance, which will get the property’s developers—Toby Moskovits and Yechiel Lichtenstein—off the hook for the bridge loan, should be ready by the end of the month, sources at Cremac said. As is typical for the Brooklyn debt investor, the company will originate the loan and syndicate portions with a small group of other lenders, whom the sources declined to identify.
The 147-room hotel, located between North 10th and North 11th Streets, landed a $68 million loan from Benefit Street Partners Realty Trust in late 2017, which became the largest single mortgage in a collateralized loan obligation that it issued last year, BSPRT 2018-FL3.
At the time of the loan, the hotel had received temporary certificates of occupancy. But other integral parts of the business, like the swimming pool, the rooftop bar, and several other food-and-beverage options weren’t open yet, KBRA said. All are now in full swing. But the delays caused two problems.
First, the hotel’s struggle with the lagging amenities triggered a loan provision that raised the interest rate to 6.25 percent above LIBOR, from the base rate of 5.75 percent above the international benchmark. That may have made it more difficult for the operators to afford the debt.
Second, the delay may be linked to performance metrics that KBRA noted trailed behind what nearby hotels were achieving.
Occupancy between February 2018 and February 2019, a period when the hotel was affected by the delays, was just 65.6 percent, according to Smith Travel Research. That compares with 84.3 percent for comparable New York City properties.
Meanwhile, revenue per available room, an important lodging-industry benchmark, was $208.14. That’s almost 30 percent below the rates for Smith’s set of comps.
In March, sources told Commercial Observer that bidders had approached Moskovits with offers to buy the hotel for around $135 million. But Moskovits emphatically denied, at the time, that she’d put the hotel up for sale.
Moskovits and Benefit Street have a bit of a history. Moskovits and Lichtenstein also partnered with the lender on an $89 million refinance on 564 St. John Place, a multifamily project they controlled in Brooklyn, in late 2017. Nine months later, the parties were in court after Benefit Street alleged monetary and non-monetary defaults, and tried to push the borrowers into a UCC foreclosure sale.
In that case, Moskovits was able to save the property with a clutch $97 million refinancing from Arbor Realty Trust last August.
CREMAC’s forthcoming loan appears set to play the same role for the Williamsburg Hotel.
Moskovits declined to comment.