Westin Book Cadillac in Detroit, owned by the Cleveland Ferchill Group, is underwater with $ 77 million loan as value plunges into pandemic
In the latest sign of distress in the hotel market, the Westin Book Cadillac in downtown Detroit is now underwater on its commercial mortgage-backed debt totaling $ 77 million.
Trepp LLC, which tracks CMBS debt, says the appraised value of the 453-room hotel has dropped significantly from $ 136 million at the end of last year to $ 74.6 million in September, a little less than the outstanding balance of a pair of CMBS loans taken out by its owner. earlier this year, around the time the COVID-19 pandemic was making its way across the United States – one for $ 45 million and another for $ 32 million.
The New York-based company says the debt is not paid until May.
An email was sent to John Ferchill, head of the Cleveland-based Ferchill Group, owner of the hotel he remodeled in 2008 at a cost of $ 180 million.
The building opened in 1924 as the Book-Cadillac Hotel and had been vacant and in disrepair for more than two decades before the redevelopment, one of many large-scale projects that helped start a wave of building rehabilitation in the city center.
It’s one of the more well-known hotels in the Detroit area, but it closed for much of the spring during the pandemic, which has crushed the hospitality industry.
The Townsend Hotel in downtown Birmingham, Michigan, is also behind on a $ 35 million ready.
In addition, some hotel construction projects have been delayed. Many industry watchers say so may not recover at pre-pandemic levels until 2023 or 2024.
The most recent data from STR, a hotel industry analysis company headquartered in North America in Tennessee, shows hotels in the Detroit area have an occupancy rate of just 36.1 %, a decrease of 42% year over year. Additionally, average daily rates fell to $ 72.28, a 28.6% year-over-year decline, while RevPAR – the industry short for revenue per available room, a measure Key Financial – fell 58.6% to $ 26.11.
Still, these are all improvements from market lows in April. The occupancy rate was only 22.9% the week of April 4; the week of April 25, daily rates were $ 63.38 and RevPAR plunged to $ 14.88 the week of April 4.
Trepp said that between January and April of this year, revenue was $ 19.76 million while expenses were $ 21.78 million, creating a shortfall of more than $ 2 million over of those months alone. More recent financial data for the hotel was not available.
But net operating income for the previous three years was $ 9.85 million (2019), $ 10.63 million (2018) and $ 11.11 million (2017), according to data from Trepp.
Trepp says the loans were guaranteed with a 78% occupancy rate at the Westin Book Cadillac, but it was only 43% occupied in the first four months of the year.
CWC Capital Asset Management LLC is the special manager, according to Trepp. A special manager tries to find a resolution to the debt. Loans could be modified or extended, or another agreement could be made with the owner.
Both loans were made in January with Citi Real Estate Funding Inc., according to Trepp.