As hotel rooms sit empty, as businesses try to recover from weeks being closed — and still facing restrictions — the symptoms of the coronavirus pandemic on the hospitality and retail sectors continue to spread.
Specifics are hard to come by, but information contained in property tax protests considered by Lancaster County commissioners last week provides a rare look into the extent of the hit on some companies in Lincoln.
The Journal Star reviewed requests from several businesses, all seeking to have their assessed property value lowered under a state law that allows for adjustments to properties that have physical damage from a fire, flood or earthquake.
The Lancaster County Board on Thursday denied all of the requests.
But financial information included with some of the requests, details that typically would never be made public, shows the struggles facing some of the harder-hit industries.
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Take big-box retailer Kohl's, for example. The company closed its two Lincoln stores in late March and didn't reopen them for in-person shopping until mid-May, offering only curbside pickup of items bought online in the interim.
That took a big toll on the local stores' sales. According to information included in the company's request to have its valuation lowered, sales at the Kohl's at Wilderness Hills shopping center at 27th Street and Yankee Hill Road fell from $6.57 million in the first half of 2019 to $4.2 million this year, a 36% decline.
The Kohl's at 84th and O streets suffered a similar decline, seeing its sales fall 35% during the same time frame, from $5.93 million in 2019 to $3.84 million this year.
Both stores reported higher sales in January and February this year, which means percentage losses during the March-June period are even higher.
Gateway Mall, one of more than two dozen U.S. malls owned by Starwood Capital Partners, did not include financial information in its request. But an attorney representing the mall told the County Board that its net income fell by $1 million, or 25%, in the first half of the year compared with a year earlier.
Gateway, which reopened in early May after closing for more than a month, has also been hit hard by store closings. Lane Bryant and Justice are both in the process of closing their doors. Just a few months before the pandemic hit, the mall also lost Forever 21.
Another industry that's been hit hard is the hotel business.
Embassy Suites at 10th and P streets set an expectation in its 2020 budget that it would fill 77% of its rooms at an average rate of $144. Through the first six months of the year, it's filled 36% of its rooms at an average rate of $130.
The hotel has still managed to generate net operating income of nearly $788,000 so far, but that's down 28% from what it would have expected through the first half the year, according to financial documents included in its request. It's adjusted expectations for annual profits to $1.5 million, down from an original projection of more than $4 million.
Stephanie Nyhus, an attorney representing JDHQ Hotels LLC, the owner of the Lincoln Embassy Suites, said during the hearing that more than 50% of the company's employees remain on furlough.
"There is no end in sight in this pandemic and these issues will remain for the year," the hotel said in its property assessment reduction request, which sought to have its current value of $21.8 million lowered to $15.6 million.
Embassy Suites was the only one of the three large downtown convention hotels to remain open during the pandemic.
The Graduate, which reopened last month, also sought to have its valuation lowered, although it did not provide any financial documentation. The hotel earlier this year made more than 100 temporary layoffs at its Lincoln location permanent.
The Cornhusker Marriott, which closed in early March, has not reopened. It also permanently laid off about 80 employees. The hotel's parent company, Marcus Corp., which also owns Lincoln's movie theaters, last week reported corporate-wide revenue for the second quarter of $7.9 million, down from more than $230 million in the second quarter of 2019.
Marcus did not seek to lower the assessed value for The Cornhusker, however.
Several other hotels also argued for lower valuations based on the financial effects of COVID-19.
An attorney representing two hotels near 27th and Superior streets, Comfort Inn and Suites and Fairfield Inn by Marriott, said both have been hit hard by the pandemic.
Comfort Inn lost $133,000 for the January-June period, as its occupancy rate dropped into the single digits for April, May and June.
The Fairfield Inn lost $59,000 during the first half of the year.
Another Fairfield Inn and Suites near the Lincoln Airport reported that its occupancy rate for the first six months of the year was 46%, compared with more than 70% during the same period a year ago. It also saw a substantial decline in the average rates paid for its rooms in April, May and June.
The Holiday Inn Express near 84th Street and Nebraska 2 filled only 36% of its rooms in the first half of the year, compared with 65% in the first six months of 2019.
Meanwhile, the Holiday Inn near 27th Street and Pine Lake Road fared better at filling rooms, seeing its vacancy rate drop from 69% in the first half of 2019 to 49% this year, but it saw a bigger decline in the daily rates paid for rooms, going from an average of $94 in the first half of last year to $82 this year.
Drury Development Corp., which purchased the former Journal Star production facility at Ninth and Q streets just weeks before COVID-19 restrictions started to take effect in Lincoln, also sought a valuation reduction.
In its request, the company that develops both Drury and Pear Tree Inn hotels, said it bought the site to build a hotel there and the $9.625 million purchase price was justified at the time. Now, however, "the intended use is no longer viable due to COVID-19's impact on the hotel industry."
Drury sought to have the valuation of the site, currently $8.3 million, reduced to $5.5 million.
Two other businesses, Staples at 50th and O streets, and Texas Roadhouse near 62nd Street and Nebraska 2, also sought reductions in their assessed value, but they did not provide any financial information to support the requests.
Dozens of businesses, including Kohl's, the owners of Oak View Mall and the downtown Omaha Embassy Suites, attempted to have their property values lowered in Douglas County, using the same state law. The Douglas County Board of Commissioners voted down all those requests.
Reach the writer at 402-473-2647 or molberding@journalstar.com.
On Twitter @LincolnBizBuzz. Reporter Riley Johnson contributed to this story.
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