Refinancing of a $98 million debt on two Manhattan hotels is likely to be facilitated by data showing the good performance of the properties and the strong record of the Kuwaiti financial institution seeking the rollover.
Revenue at the 148-key Hampton Inn Manhattan Grand Central, at 231 East 43rd Street, and the 135-key Holiday Inn Express Herald Square, at 60 West 36th Street rose to $21.9 million this year from $21.7 million at origination. And performance has been impressive, as reflected by the Hampton Inn’s occupancy rate. As of mid-2019, it stood at 92.3 percent, with the hotel earning an average daily rate of $224.65, as per Trepp.
Expenses have risen to $14.5 million this summer from $12.6 million at origination, however, and CMBS financial data hints at the need for refinancing. When Cantor Commercial Real Estate originated the five-year, interest-only debt five years ago, income for the Hampton Inn covered debt-service requirements more than twice over, with a debt-service coverage ratio of 2.04. But by June — the most recent month with data available from Trepp — that number had declined to 1.28.
Yet the development still comes as a surprise. Neither Fitch Ratings nor Kroll Bond Rating Agency expressed concern about the Manhattan lodging debt – 6.2 percent of a COMM 2015-DC1 CMBS deal – earlier this year, when they last issued their opinions about the deal brought to market by Deutsche Bank four years ago.
The mortgages on the property, including an $85 million senior loan held in CMBS and a $13 million subordinate component, were scheduled to pay off on Oct. 6. Confirming refinancing plans, a spokesman for Kuwait Finance House Capital (KFHC), which manages the fund owning the debt, said that “in the last 25 years, Kuwait Finance House and KFH Capital [have] managed numerous funds that invested in U.S. real estate on behalf of their clients. They have a very strong record.”
The World Bank rates oil-rich Kuwait as one of the world’s 30 wealthiest countries on a per-capita basis. KFHC’s parent company Kuwait Finance House, based in Kuwait City, was founded in the late 1970s as the country’s first Islamic bank.