The Midtown-based real estate investment firm Meadow Partners closed on a long-term ground lease that includes the payment of $22 million in cash and an annual rent, for a 16-story Midtown hotel. It is Meadow’s first hospitality deal.
Meadow, headed by Managing Partner Jeffrey Kaplan and Partner Timothy Yantz, signed the 99-year lease for the 135-room Bedford Hotel at 118 East 40th Street, between Lexington and Park avenues, yesterday, Yantz told The Real Deal. He declined to disclose the annual rent payment.
Demand from travelers overall remains active in the area, although insiders disagreed on some details.
“The hotel market in Midtown continues to be very strong,” John Fox, senior vice president at PKF Consulting USA, said. “While the supply of rooms is expected to increase over the next few years, demand continues to increase at strong rates.”
One hotel operator saw rates as soft, however, in part because of Internet options like Airbnb.
“The Midtown market remains robust in terms of occupancy but as has been the case for some time now rates are still not where they were pre-Lehman,” Vijay Dandapani, president of hotel operator Apple Core Hotels, said.
Regardless, Meadow plans to upgrade the hotel.
“Our business plan is to work with the [property owners] to fully renovate the hotel. Our plan is to bring it into the 21 century,” Yantz said.
The firm plans to spend $15 million in a phased rehabilitation of the hotel over the next 18 to 24 months, which could increase the number of hotel rooms by as much as 10 percent. The management firm Interstate Hotels & Resorts will operate the hotel. Yantz said they had not yet made a decision about whether the name would change.
Meadow is an active buyer and operator since the company was formed in 2009. This week it announced it was investing $15 million in the office building 211 East 43rd Street, which it purchased in 2013. And in December, the company paid $72 million for a rental property in Williamsburg.
Meadow signed the ground lease with several individuals who own the property through a tenant-in-common structure. William Rand, speaking on behalf of the owners, declined to comment.
In addition to the room rehabilitation, Meadow expects at a future date to find a new tenant for the currently vacant 3,000-square-foot restaurant space.
The prior hotel tenant had a long-term lease that expired this year, and Meadow had been working on the deal for nearly a year, Yantz said. Robert Siegel, CEO of Metropole Realty Advisors, was the broker on the deal, Yantz said. Siegel did not immediately respond to a request for comment.