The owner of the Margaritaville Resort Times Square Hotel filed for bankruptcy after disappointing results since its 2021 opening left it fighting a foreclosure auction, court papers show.
(Bloomberg) — The owner of the Margaritaville Resort Times Square Hotel filed for bankruptcy after disappointing results since its 2021 opening left it fighting a foreclosure auction, court papers show.
The legal entity that owns the equity of the island-themed hotel filed for Chapter 11 protection Sunday night in New York, according to court papers. The hotel itself will likely seek protection from creditors soon, the filing shows.
The hotel — the only Manhattan outpost of Jimmy Buffett’s kitschy hospitality chain — opened in 2021, when tourism in Times Square had not yet recovered from the Covid-19 pandemic. It has lost money since then, and a mezzanine lender has since said the hotel’s owner is in default.
A foreclosure auction for the hotel was set for July 10. The bankruptcy filing prevents that auction from going forward.
“The bankruptcy filing will not impact resort operations, the property will remain open and staff members employed,” Margaritaville Chief Investment Officer Evan Laskin said in an emailed statement. The company “looks forward to delivering fun and escapism through the resort and restaurant experiences for guests and New Yorkers for a long time,” he added.
The hotel boasts more than 230 guest rooms and over 34,000 square feet of retail space, Sethian Pomerantz of Soho Properties, which developed the hotel, said in a sworn declaration. In May, appraisers pegged its value somewhere between $266 million and $350 million, according to Pomerantz.
The hotel’s owner aims to refinance some $309 million of debt tied to the project during the bankruptcy, Pomerantz said.
“Given the projections for future income, the appraised value of the Hotel, and the solid location in Times Square where tourism is reviving, the Debtor believes that a refinancing of the Hotel can ultimately be achieved within a reasonable period of time,” he said. The hotel’s revenues are improving and are projected to eclipse $25 million by the end of next year “once various vacant retail space is leased,” he said.
The hotel industry has largely recovered from a sharp demand shock in the early months of the pandemic, with leisure travelers leading the rebound. Occupancy rates were nearly 86% across the New York lodging market in June, according to data provider STR, slightly below pre-pandemic averages.
Even so, industry players are struggling to meet demands from lenders. Last month, the owner of two of San Francisco’s largest hotels signaled intentions to hand over the properties, citing high office vacancies and concerns over street conditions. Another owner, Ashford Hospitality Trust Inc., said it would likely return 19 hotels to lenders in the face of higher interest rates and lower real estate values.
Soho Properties didn’t respond to messages seeking comment.
The case is 560 Seventh Avenue Owner Secondary LLC, 23-11071, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
(Adds comment from Margaritaville in paragraph five.)
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