ATLANTA—NYLO Hotels LLC is one of the hotel companies being directly affected by the bankruptcy filing of Lehman Brothers Holdings LLC earlier this week.
John Russell, NYLO’s CEO, said Thursday on his way to the grand opening of the company’s Warwick, Rhode Island, property, that Lehman Brothers had fully funded NYLO’s operating company, brand and franchising effort, but because the money has already been accounted for, the company faces no serious ramifications from the filing.
“We’re OK,” Russell said.
Lehman Brothers owns 54 percent of NYLO’s operating company. It won’t be affected because it is not in debt and NYLO company status is limited-liability.
“We’re taking fees for the services we offer,” Russell said.
Russell said his stomach felt uneasy when he heard the news that Lehman Brothers was filing for bankruptcy on Monday.
“It’s like someone knocked the air out of me,” Russell said. “Lehman’s been a good partner. It’s kind of like losing a family member. I especially feel sorry for the people. They’re good people.”
Russell and other NYLO officials have described Lehman Brothers as a strategic partner and equity investor since the initial launch in September 2005. It had repeatedly been stressed that Lehman would help NYLO fund the construction of its first five to 10 hotels.
NYLO’s plans from the beginning were to develop about 10 hotels then rely on a franchising program to facilitate further growth. To date, NYLO has two properties open—Plano, Texas, and Warwick. It has another under construction in Las Colinas/Irving, Texas and two more corporate-owned hotels ready to develop in the near future: Overland Park, Kansas, and Broomfield, Colorado. Each of them has Lehman Brothers funding already in place.
The company is looking for a sliver equity partner for a project in Overland Park, Kansas, and expects to begin construction on that property by the end of the year, according to Russell.
Russell said the common knowledge that Lehman was NYLO’s partners has presented some issues.
“We have a (public relations) challenge,” he said. “Our relationship was well known, and we’ve been fielding a lot of calls about it.”
For now, NYLO’s executive team is going to look forward to growing the NYLO brand and the XP by NYLO concept, a select-service offering introduced in January.
“The good news for us is that it doesn’t affect us in that we’re fully funded,” Russell said. “But the bad news is that going forward there’s no more Lehman. If we decide to build more ourselves, we have to find another partner.
“There are different entities out there that have money,” he said. “Lehman Brothers Holdings now is not one of them. That means we don’t have an equity partner, but I’m confident we’ll be able to find one.”
NYLO hired franchising sales veteran Charles “Chick” Armstrong to accelerate its franchising program. Russell said the brand has more than 50 franchising deals in various stages of completion.
NYLO hotels are full-service properties that cater to business and leisure travelers and target consumers looking for hotel rooms up to US$249 a night.
Russell said the fate of Lehman Brothers and Merrill Lynch, another financial company with hotel-industry business that saw its demise this week, leaves some question marks for the hotel industry.
“There’s a lot of uncertainty and trepidation,” Russell said. “Money will be tougher to get, terms will be stricter.
“I don’t think development is going to stop, but it’s going to slow down even more than it already had been slowing.”
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