18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 1 of 217 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK : In re: : Chapter 11 : 1141 REALTY OWNER LLC, et al., : Case No. 18-12341 (SMB) : : Jointly Administered Debtors. : : DECLARATION OF EDWARD R. ESCHMANN IN FURTHER SUPPORT OF DEBTORS’ MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING THE DEBTORS TO OBTAIN POST-PETITION, PRIMING, SENIOR SECURED, SUPERPRIORITY FINANCING PURSUANT TO 11 U.S.C. §§ 105, 362, 364(c) AND 364(d), BANKRUPTCY RULE 4001(c) AND LOCAL BANKRUPTCY RULE 4001-2 Edward R. Eschmann, MAI, declares as follows pursuant to 28 U.S.C. § 1746: 1. I am a Director of the Valuation and Advisory Hospitality and Gaming Group of CBRE, Inc. (“CBRE”) in New York City, where I have been employed since 2000. 2. I have more than thirty-four (34) years’ experience of valuation and consulting experience throughout the United States, Puerto Rico and the Americas. I am a designated Member of the Appraisal Institute and Royal Institution of Chartered Surveyors and a Certified General Real Estate Appraiser in the states of New York and New Jersey and have held licenses in other jurisdictions including Connecticut, Vermont, Illinois, Washington, DC and Pennsylvania. I have a Bachelor of Science degree from the University of Massachusetts, Amherst. 3. Since 2006, I have specialized in the hospitality asset class and have been the director of the Tri-State Hospitality Group of CBRE in New York City covering the New York, New Jersey and Connecticut region. Prior assignments include a wide variety of full and partial interest appraisals on property types including urban and suburban luxury, full and limited service boutique independent and franchised hotels, mixed use residential condominium/hotels, corporate 1 18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 2 of 217 headquarters and conference hotels, suburban and urban office buildings, regional retail malls and outlet centers with hospitality components, and residential apartment and condominiums with hospitality components. Some significant assignments in New York City include The London NYC, Mondrian SOHO, Element Times Square, Bryant Park Hotel, The Lowell and The Edison Times Square, among many others. 4. I submit this declaration (the “Supplemental Declaration”) in further support of the Debtors’ Motion for Entry of Interim and Final Orders Authorizing the Debtors to Obtain Post- Petition, Priming, Senior Secured, Superpriority Financing Pursuant to 11 U.S.C. §§ 105, 362, 364(c) and 364(d), Bankruptcy Rule 4001(c) and Local Bankruptcy Rule 4001-2 (the “DIP Financing Motion”) [Docket No. 7]. 5. Except as otherwise indicated, all statements in this Supplemental Declaration are based upon my personal knowledge or materials supplied by CBRE personnel. Any opinions set forth herein are based on my experience and expertise in appraising hotel properties in New York City. If I were called to testify as a witness in this matter, I would testify to the facts set forth herein. 6. Prior to the Petition Date1, CBRE was engaged by the Debtors to perform an appraisal (the “Appraisal”) of The Flatiron Hotel (the “Hotel”). I led the engagement and supervised all aspects of the appraisal, which was completed on August 30, 2018. A true and correct copy of the Appraisal is annexed hereto as Exhibit A. 7. As described in the Appraisal, as of August 26, 2018, the fee simple interest in the Hotel is valued at $45,300,000 “as is”. As of August 26, 2019, the fee simple interest in the Hotel is valued at $52,000,000 “as complete,” that is, when certain capital expenditures and 1 Capitalized terms not defined herein shall have the meaning ascribed to them in the DIP Financing Motion. 2 18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 3 of 217 improvements have been made and the Hotel’s repositioning in the market has occurred. As of August 26, 2020, the fee simple interest in the Hotel is valued at $56,000,000 “as stabilized,” that is, when the capital expenditures and improvements are complete, and the repositioned Hotel has been absorbed into the market without surges in occupancy rates and has a stable cash flow. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge, information and belief. Dated: New York, New York September 4, 2018 /s/ Edward R. Eschmann Edward R. Eschmann, MAI Director, Valuation and Advisory, Hospitality and Gaming Group CBRE, Inc. 3 18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 4 of 217 Exhibit A 18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 5 of 217 APPRAISAL REPORT FLATIRON HOTEL 9 West 26th Street (aka 1141 Broadway) New York, New York County, New York 10010 CBRE, Inc. File No. 18-047NY-1832 Tracy L. Klestadt, Esq. KLESTADT WINTERS JURELLER SOUTHARD & STEVENS, LLP 200 West 41st Street, 17th Floor, New York, New York 10036 www.cbre.com/valuation www.cbrehotels.com 18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 6 of 217 1 Penn Plaza, Suite 1835 New York, NY 10119 T (212) 207-6092 F (212) 207-6169 VALUATION & ADVISORY SERVICES www.cbrehotels.com August 30, 2018 Tracy L. Klestadt, Esq. KLESTADT WINTERS JURELLER SOUTHARD & STEVENS, LLP 200 West 41st Street, 17th Floor, New York, New York 10036 RE: Appraisal of Flatiron Hotel 9 West 26th Street (aka 1141 Broadway) New York, New York County, New York 10010 CBRE, Inc. File No. 18-047NY-1832 Dear Mr. Klestadt: At your request and authorization, CBRE, Inc. has prepared an appraisal of the market value of the referenced property. Our analysis is presented in the following appraisal report. The subject is a 64-room full Service 11-story hotel property located at the northwest corner of West 26th Street and Broadway in The Nomad section of Manhattan, NY. The improvements were constructed in 1927, repositioned circa 2010/11 and in average condition for its age. The property is situated on a 3,075 SF site. The property is subject to a bankruptcy process that has negatively impacted performance. The retail/restaurant space has not been in operation and the property has recently had a change in the hotel management company while in litigation. The property has been operating as an independent non-branded hotel. The property is currently no operating at a stabilized level, therefore we have included “As Is”, “As Completed” and “As Stabilized” values within the appraisal report. Based on the analysis contained in the following report, the market value of the subject is concluded as follows: 18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 7 of 217 Tracy L. Klestadt, Esq. August 30, 2018 Page 2 MARKET VALUE CONCLUSION Appraisal Premise Interest Appraised Date of Value Value Conclusion As Is Fee Simple Estate August 26, 2018 $45,300,000 As Complete Fee Simple Estate August 26, 2019 $52,000,000 As Stabilized Fee Simple Estate August 26, 2020 $56,000,000 Compiled by CBRE The value allocation of the subject has been concluded as follows: AS IS VALUE ALLOCATION Interest Appraised - Allocation Value Conclusion Fee Simple Estate As Is Value $45,300,000 Personal Property $300,000 Business Enterprise Value $0 Real Property Value - As Is $45,000,000 Compiled by CBRE AS COMPLETE VALUE ALLOCATION Interest Appraised - Allocation Value Conclusion Fee Simple Estate As Complete Value $52,000,000 Personal Property $2,600,000 Business Enterprise Value $0 Real Property Value - As Complete $49,400,000 Compiled by CBRE AS STABILIZED VALUE ALLOCATION Interest Appraised - Allocation Value Conclusion Fee Simple Estate As Stabilized Value $56,000,000 Personal Property $2,300,000 Business Enterprise Value $0 Real Property Value - As Stabilized $53,700,000 Compiled by CBRE The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter. The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), and the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. It also conforms to Title XI Regulations and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) updated in 1994 and further updated by the Interagency Appraisal and Evaluation Guidelines promulgated in 2010. 18-12341-smb Doc 36 Filed 09/05/18 Entered 09/05/18 10:47:47 Main Document Pg 8 of 217 Tracy L. Klestadt, Esq. August 30, 2018 Page 3 The intended use and user of our report are specifically identified in our report as agreed upon in our contract for services and/or reliance language found in the report. As a condition to being granted the status of an intended user, any intended user who has not entered into a written agreement with CBRE in connection with its use of our report agrees to be bound by the terms and conditions of the agreement between CBRE and the client who ordered the report.