Dive Brief:
- LuxUrban announced Wednesday plans to form a joint venture with Lockwood Development and Bright Hospitality Management that will infuse $7 million of capital into the beleaguered hotel company.
- The joint venture will also integrate technology to streamline operations at two of LuxUrban’s properties in New York City, with the option for the involved firms to continue their partnership at other LuxUrban hotels if they are successful, with potential additional investments of up to $35 million.
- In tandem with the news, LuxUrban reported its third-quarter earnings, posting revenues that were less than half of what they were in the prior-year quarter. Over the course of the past year, the hotel company has faced a slew of lawsuits as well as the threat of Nasdaq delisting.
Dive Insight:
The newly announced deal is part of what New York- and Miami-based LuxUrban calls Lux 2.0, the company’s strategy to rebound following a year of challenges.
Those hardships included legal and financial issues. In January, New York City sued LuxUrban for $1.2 million for operating “illegal transient occupancies” in “apartments that can only legally be advertised and used as permanent residences.” Apple Hospitality REIT filed another lawsuit in June claiming “squatting” at LuxUrban’s Hotel 57, according to The Real Deal.
And in August, Nasdaq issued a listing deficiency notice following LuxUrban’s failure to file its required 10-Q form with the Securities and Exchange Commission on time.
In a bid to reassure shareholders, the company appointed a new CEO, Robert Agiro, in June, as well as a special committee to increase shareholder value.
According to Agiro, the new joint venture could create “a strong foundation for future growth as we continue our Lux 2.0 efforts.”
The joint venture will focus on rejuvenating the two New York City properties, as well as leverage Bright’s technology platform to streamline hotel operations. It will also introduce Lockwood’s VItalty brand to the New York City market, according to the announcement.
LuxUrban, Lockwood and Bright have currently signed a non-binding letter of intent. The pilot joint venture still requires approval from both hotels’ landlords, as well as negotiated definitive agreements.
“With New York City's hotel market on the upswing, we're thrilled to play a part in delivering a top-notch experience that NYC truly deserves,” said Charles Everhardt, president of Lockwood, in a statement.
LuxUrban posted a gross profit loss of $16.8 million in the third quarter. The company said it has streamlined its hotel portfolio to exclude underperforming properties, and now manages eight hotels.
Its total operating expenses also soared in the quarter — to $12.1 million compared to $2.7 million in Q3 2023 — due to a $9.7 million reserve “for litigation with landlords,” the company said.
