The owner of the Hyatt Regency Buffalo hotel at Fountain Plaza – which just lost its longtime brand affiliation this week – fell behind on its mortgage payments during the Covid-19 pandemic, as profits fell and its cash dwindled for at least the past year, according to data from an industry research firm.
Paul Snyder’s Snyder Corp. missed its April payment on a $20.87 million loan balance, which is backed by the 396-room hotel adjacent to the Buffalo Niagara Convention Center, according to industry researcher Trepp.
That loan, which is held by Wall Street investors as part of a security, is listed as 30 days delinquent, and is now in collections, according to Trepp.
By itself, that’s not yet an indication of significant trouble, although Trepp’s information doesn’t indicate if Snyder also missed his obligation for May, because of a lag in reporting.
However, the loan also has been on the regular loan servicer’s “watchlist” since February 2019, which means it was identified by loan servicer Wells Fargo & Co. as a problem loan at risk of default. That’s because Snyder’s ability to cover loan payments from the hotel’s income and cash flow also has fallen in the last year, Trepp said.
KBRA, a debt ratings firm cited by Trepp, went even further, reporting “a substantial decline in net cash flow, coupled with an anticipated decline in demand due to the Covid-19 pandemic.”
Snyder officials did not respond to requests for comment Tuesday and Wednesday.
On Tuesday, Hyatt Hotels Corp. said it is pulling the Hyatt brand from the historic hotel as of June 1, after more than three decades. The Chicago-based corporation didn’t give a reason, but the Buffalo hotel has been closed since April 1 because of the pandemic, which means there’s no revenue coming in at all.
The decision by Hyatt was not only a shock to city business leaders, but also to Snyder, according to Keith Belanger, chairman of Buffalo Place, the downtown business improvement organization. His board includes Sandra Snyder Schoellkopf, executive vice president of Snyder Corp., as one of its directors.
“The Snyder family are very committed. They’re very concerned. They want to do the right thing for their 350 employees,” said Michael Schmand, executive director of Buffalo Place, who said he spoke to Schoellkopf Tuesday night. “This is a very fluid situation. She believes it’ll all bode very well for downtown Buffalo. They’re working extremely hard to make things happen.”
The situation marks a rapid turnaround and decline for Buffalo’s second-largest hotel, and one of the city’s flagship venues for meetings, banquets and other special events.
Located at 2 Fountain Plaza, the hotel building dates to 1910 and has been part of the Hyatt family for 36 years. It’s undergone multiple renovations and upgrades during that time, including in 2008 and during the past few years. Snyder made $285,000 in repairs to the roof, swimming pool and atrium glass, as well as a $1.1 million renovation for its restaurant and bar last year. And it had planned to renovate the guest rooms and replace furniture and fixtures later this year and into 2021.
In August 2012, Snyder took out a $25.5 million loan from Goldman Sachs & Co. to refinance prior debt. The 10-year loan, at 5.11%, was slated to mature in 2022, with a balloon payment – which is typical for commercial real estate loans.
At the time the loan was originated eight years ago, the hotel’s gross income was $20.4 million, with expenses of $16.4 million. That left net operating income of $4.02 million, with $3.21 million in net cash flow – enough to cover its annual principal and interest payments for 1.77 years.
Yet the loan hasn’t performed that well since then – even though Snyder claimed that “Buffalo continues to be a thriving market” with “a good increase in group business” and “double-digit revenue increases over last year” for corporate group, association and sports groups, according to the servicer commentary included by Trepp.
In the 12 months ended Sept. 30, 2019, revenues were down to $18.45 million, with $16.1 million in expenses. Net operating income had fallen to $2.4 million, while net cash flow was down to $1.6 million. And the debt service coverage ratio had fallen below 1 – a trigger for trouble and even automatic default for many commercial mortgages.
