The COVID-19 pandemic has hit real estate hard over the last nine months, and the hospitality industry is struggling. Some New York City hotels were already struggling to make debt payments, and the worldwide epidemic was the final blow.
The Tillary Hotel
The owner of the Tillary Hotel in Brooklyn, a hip, upscale boutique hotel at 85 Flatbush boasting a 174-room hotel and a 64-unit luxury apartment building, filed for Chapter 11 bankruptcy on December 18, 2020. The filing in the bankruptcy court for the Southern District of New York claimed $50 to $100 million in liabilities.
The threat of foreclosure forced the once-popular hotel to close its doors on March 15, 2020, due to rising COVID-19 infections, which hit New York City hard in the early days of the pandemic. The hotel briefly opened to shelter the homeless from May 15, 2020, to June 30, 2020, before opening to the public again on July 15, 2020. Because of the pandemic, the hotel and residential building faced “substantially reduced” occupancy. The Tillary owner's bankruptcy filing indicated that its secured lender intended to force a sale of the company's assets.
It's not looking good for the hospitality industry, which lost 500,000 jobs in December. With tourism and hospitality revenues vanishing, another planned hotel in the Williamsburg area of Brooklyn is halting construction. The owners of a planned 26-story hotel, including residential apartments, also filed for bankruptcy in December.
Both hotel owners filed for Chapter 11 bankruptcy, which permits a company to reorganize its debt and pay it to creditors over time. The owners of The Tillary plan to keep the hotel open and running during the reorganization and plans to convert the residential building to condominiums.
Proceed with Caution
While hotels are facing lower occupancy rates as a result of the pandemic, so are residential projects. The residential portion of the Tillary also struggled to keep tenants with an economy on the verge of collapse. As a result of the pandemic, there are some great real estate deals to be had in NYC right now. But if you're planning a short-term residential project, keep in mind that experts don't expect NYC to be back to normal until late 2022 as vaccination becomes more widespread.
NYC Real Estate Attorney
If you're investing in NYC residential real estate in 2021, the Law Offices of Melvin Monachan, PLLC is here to help. We can guide you through the closing process and help reduce the uncertainty of investing in residential real estate. Call us at (516) 714-5763 to schedule a consultation or contact us online.