New York's hotel growth causes pause in bond market

New York

NEW YORK is experiencing an explosion in hotel construction.

While this is welcome news for visitors to Manhattan who should benefit from increased competition and lower prices, among bond investors and analysts the view is considerably less sanguine.

What's concerning is that as the issuance of bonds backed by a single hotel property quadrupled to US$5.6 billion this year, and the total mix of hotel debt in all mortgage bonds has more than doubled to US$9.9 billion, according to data from Commercial Mortgage Alert, the size of the loss cushions that act as safeguards on the bonds have …