Cash making quick

Plaza needs cash quick! - Plaza Hotel

Plaza needs cash quick!

Financial information on the Plaza Hotel being circulated to potential buyers, sources said, indicate that a major infusion of cash is needed in the next couple of months to avoid the hotel's bankruptcy.

According to the documents, when Donald J. Trump purchased the 815-room Plaza three years ago for $413 million, he financed $300 million of that with loans and mortgages and another $115 million in personal loans.

In the last three years, he has put in $8.7 million and there was another $7 million in deferred interest for a total of $430 million in debt. In 1990, there was $2.22 million in operating losses before $41 million in interest was to be paid. The total loss for the year is more than $43 million. The hotel's deficit for the past three years is $119 million.

The financial documents also indicate substantial doubt about the ability of the partnership to continue as a going concern and said it is experiencing severe liquidity problems.

Because it is an extraordinary property, the Plaza Hotel has a value beyond the economic value of the hotel, said Stephen W. Brener, president of Stephen W. Brener Associates Inc., a hotel broker and consultant. It is the buyer who would set the value, he said, because of the prestige and location and, he added, those are not cap rates.

Brener said the hotel has been beautifully upgraded and maintained. "It's one of the great locations in Manhattan," he noted. "The plus factors are there, but the hotel will sell for a low cap rate. If you want a high cap rate, you buy a Days Inn."

Abe Wallach, senior vice president of First Capital Management, said "We have always been interested in the Plaza Hotel for purposes of acquisition, however, if those numbers are correct, somebody would have to take a hit of between $100 to $200 million for the property to sell today.

"Not only is the performance of the hotel a problem in a declining market," he noted, "but it would be very difficult to finance the building, especially given the negative publicity it has received because of Trump's problems.

"It's a wonderful property," Wallach said, "and there is an opportunity for future generation of additional revenue through adding more space to the building, and some conversion to residential ownership." But, Wallach said, those concerns are still in the future and it would be very difficult to value those items today given market conditions.

Trump floated the idea of condominium conversion earlier this year as one way of making ends more than meet at the ailing grande dame. Attorney Jay Neveloff said he is still working on the plan. "There's a lot to do," he added. Neveloff also said there are always inquiries about purchasing the Plaza.