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Wardman Park Hotel was approved to borrow an initial $3 million in bankruptcy to preserve the historic property and find a buyer, despite objections from its former manager Marriott International Inc., Bloomberg News reported. Wardman Hotel Owner LLC, the debtor for the century-old Washington, D.C., hotel, can make an initial draw on its $8 million debtor-in-possession loan while it looks for a buyer for the property, U.S. Bankruptcy Judge John Dorsey ruled in a Delaware court yesterday. Wardman Park received the loan from a unit of Pacific Life Insurance Co., its owner and pre-bankruptcy lender, with a six-month term and 5% annual interest rate, according to filings. Wardman Hotel Owner owed Pacific Life $130.5 million as of Dec. 21, according to court papers. “It’s time to hit the refresh button,” Laura Davis Jones of Pachulski Stang Ziehl & Jones, an attorney for Wardman Hotel Owner, said in the hotel’s first-day bankruptcy hearing. Selling the Wardman Park is the best way to maximize value for all stakeholders, she said. Wardman Park Hotel, which opened in 1918 at the height of the Spanish Flu pandemic, filed for bankruptcy this week after closing in late March due to the outbreak of COVID-19. The historic hotel is one of the largest in Washington, D.C., and has played host to numerous presidential inaugural balls and been home to former presidents Herbert Hoover, Dwight Eisenhower and Lyndon Johnson, according to court filings. Marriott, which had the contract to manage the hotel until “minutes before” the bankruptcy filing, according to its attorneys, filed a raft of objections to the first-day motions, calling the move “a bad faith bankruptcy.” Marriott alleged in court filings that the Wardman bankruptcy filing is an attempt to avoid paying Marriott claims awarded by a Maryland state court.

New York City apartment tenants are more than $1 billion in debt from missed rent payments during the coronavirus pandemic, according to a new survey measuring the depth of the rent crisis brought on by COVID-19, the Wall Street Journal reported. The debt figure is the most recent indicator that unemployment benefits and federal stimulus packages have so far been inadequate to alleviate the growing financial burden of missed rent payments across thousands of city households. Both landlord and tenant advocacy groups have lobbied heavily for more government rental assistance during the pandemic. The survey, conducted by the Community Housing Improvement Program, a landlord trade group, focused on New York buildings subject to the city’s rent-regulation laws. These apartments account for about half of the city’s total rental apartments. Tallying responses from landlords, the group estimated that as many as 185,000 households living in these apartments are more than two months behind on rent, with an average debt of more than $6,000. Jay Martin, executive director of CHIP, said rent debt from the rest of New York’s apartment inventory is probably the same or greater, meaning the total debt New York City renters are carrying is likely more than $2 billion. The COVID-19 relief package passed by Congress in December included $1.3 billion in pandemic rental assistance for New York state. It is still unclear how much of that will be made available for New York City, however, or how difficult it will be for tenants to meet eligibility requirements for the funds. State and city housing agencies are expected to roll out their distribution plans for the assistance in the coming weeks.

U.S. commercial landlords have granted billions of dollars of rent relief to struggling storefronts as property owners strive to keep falling occupancy rates from triggering more severe financial consequences, WSJ Pro Bankruptcy reported. With many commercial property tenants in dire financial straits due to the economic fallout from the coronavirus pandemic, landlords are reluctantly granting concessions on lease payments, lengthening payment terms, extending or shortening leases, lowering rents permanently and even forgiving past-due payments, according to real-estate advisers, property managers and lawyers. By providing the breaks following negotiations, landlords are hoping to avoid pandemic-induced tenant departures, keep properties occupied and rent payments flowing, while avoiding the larger losses that can come from evictions and increased vacancies in their shopping centers and malls. They are fearful of triggering lease provisions that kick in when key anchor retailers or a certain number of tenants leave a certain property, cutting rents for those that remain. Retail vacancies have been steadily on the rise and are expected to significantly increase. The average retail vacancy rate was around 4.5% going into the pandemic and estimated to end 2020 at 5.3% to 5.5% but is projected to increase to between 5.8% and 6.2% by the end of 2021, according to data from real-estate analytics company CoStar Group Inc. Before the pandemic, average retail rents were growing at more than 2% annually, according to CoStar. CoStar now expects rents to decline by anywhere from 1% to 3% year-over-year in 2021. A record-breaking number of major retailers — more than 60 — filed for bankruptcy in the U.S. in 2020. Major retailers announced plans to close more than 12,200 stores last year, according to CoStar. These closures will empty an estimated total of 159 million square feet of retail space, out of roughly 11 billion square feet available nationally, CoStar said. “What’s happening in the market is most definitely going to cause an overall devaluation of real estate across the country,” said Matthew Bordwin, principal and managing director at real-estate brokerage Keen-Summit Capital Partners LLC. Katharine Battaia Clark, a Dallas-based partner at law firm Thompson Coburn LLP, said on a panel during ABI's Winter Leadership Conference last month that she has seen “really aggressive negotiating tactics” being used by consultants hired on behalf of bankrupt tenants. The tenants’ position has been to “accept our terms or take a hike, we’ll reject your lease and then you’ll be an unsecured creditor and good luck to you, and you’ll have an empty space,” she said. Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

After real-estate data company CoStar Group Inc. said in February it would buy competitor RentPath Holdings Inc. for $587.5 million, RentPath employees sent emails to customers saying prices would likely increase after the acquisition closed, WSJ Pro Bankruptcy reported. “If the sale does go through CoStar will control pricing for everything and most likely will go up,” a RentPath regional account manager said in a customer email after the deal was announced, according to a lawsuit filed Monday by CoStar that was ineffectively redacted. Days later in February, a RentPath salesperson told customers in southern New Jersey and Philadelphia, “I am strongly suggesting to all clients to lock in our low pricing because if the sale goes through it will not exist EVER again,” the lawsuit said. CoStar said in yesterday’s lawsuit that it was worried that the messages could be used by federal antitrust regulators to block the acquisition and that RentPath management didn’t correct information its employees sent to customers, despite requests from CoStar. In November, the Federal Trade Commission said it would block the deal, saying the transaction “would likely lead to anticompetitive effects.” The RentPath employee messages were outlined in a lawsuit CoStar filed in the U.S. Bankruptcy Court in Wilmington, Del., where RentPath filed for chapter 11 protection in February. CoStar cited the emails to support its allegation RentPath management engaged in “a customer misinformation campaign designed to boost RentPath’s short-term sales while poisoning the FTC approval process.” The companies are now fighting in court over the deal’s collapse. RentPath terminated the agreement and is seeking a $58.75 million breakup fee from CoStar, which has denied it is liable. CoStar said that RentPath didn’t do its best to make sure regulators would approve the transaction and now wants a bankruptcy judge to rule the company violated the terms of the agreement.

Tenants in bankrupt Manhattan apartment buildings affiliated with Emerald Equity Group LLC are demanding that housing code violations including rat infestations and bed bugs be immediately addressed as part of a chapter 11 agreement, Bloomberg News reported. Residents are seeking an order compelling the debtor, 203 W 107th Street LLC, to use available funds to address outstanding New York City Housing Court orders and make any urgent repairs to the buildings, according to court papers. Emerald purchased the apartments in December 2016 with the aim of converting them into condominiums as part of its business model of capitalizing on gentrifying neighborhoods. Instead, a cluster of its buildings filed for bankruptcy last week, blaming tougher housing regulations and a tenant rent strike for their debt troubles. Tenants, the debtor’s lawyers and the lender LoanCore, which is taking ownership of the buildings in bankruptcy, reached a tentative agreement to bring the properties into compliance with the housing code, the filing said. Kellner said the buildings have already been found in contempt of housing court orders to address violations, many of which are hazardous.

Two hotels in Kissimmee went up for auction this month, and an Orlando hotel is facing the block early next year, as one expert warns that a “tsunami” of sales and foreclosures could be on the horizon, the Orlando Sentinel reported. “There’s a lot of pain out there,” said Carlos Rodriguez, CEO of Driftwood Hospitality Management, adding that only cash infusions from the government or lenders would stop the wave. But with news of the vaccine rollout and approval of the second stimulus package, Rodriguez and other market professionals see reasons to be optimistic, especially about Central Florida. “The hotels here in town going into the pandemic were actually in a very good position,” said Paul Sexton, senior vice president at Hospitality Real Estate Counselors. While data analyst group STR doesn’t see the tourism returning to 2019 highs for three or four years, Sexton said most hotel owners learned valuable lessons in the recession of 2008 that gave them breathing room. “The banks did a better job of not lending too much money,” he said. “The owners did a better job of not taking too much money.” With a capital cushion and PPP money from the first round of stimulus in March, hotel owners are playing a waiting game. The new stimulus package likely will deliver millions of dollars more to hotels under the Payroll Protection Program. “The question for owners, effectively, is can they outrun the pandemic?” Sexton said.