"For example," he tells GlobeSt.com, "Times Square used to be a detriment—-now it's an urban playground. It's become a hotel epicenter for the city. If someone had said Times Square would become a popular hotel spot years ago, people would have thought he was crazy. The Marriott Marquis in 1985-1986 was one of the first."
Adler says news such as Millennium Partners closing on a $400-million loan to buy a hotel portfolio that includes the Ritz Carlton on Central Park South and the Ritz Carlton in Battery Park City is additional confirmation of the city's economic strength. While the Rhiga Royal has struggled to make it through the negotiations process with a prospective buyer, Adler notes this is not a reflection of the market. "The Rhiga can get better operating strategies."
One of the few new hotels being developed is Tishman Realty's Westin at Times Square. When $300 million in financing was obtained, Tishman announced it proudly saying, "Despite one of the tightest hotel financing markets in a decade" it had obtained the loan. Adler notes, "For new construction it is one of the tightest markets. For refinancing and acquisitions, though, there's a substantial amount of liquidity in the market. Only those that are economically viable will get it."
"I don't see a changing in the tightness of the market. Conversion properties are popular because there's a lower cost basis and land is at a premium. If a new construction hotel project isn't financed now, it'll be tough get financing," he predicts.
"Certainly there's some concern about the economy. If it goes it impacts hotels as leisure is a discretionary expenditure, but New York is different than most markets. Yes, New York has been operating at a peak and if you're operating at a peak one might ask, 'What's the downside risk?' I believe the market will stay tight and it will ride out any economic downturn," he says.
"In 1991 the room occupancy rates did go down to 69% where they're currently at about 80%, but there was a recession, Times Square was not what it is now, the Gulf War was on and the city's economy wasn't as diverse as it is now," he notes. "I don't see that happening again."
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