The owner of the new Hyatt 48 Lex hotel has divided the Midtown property into two separate condo units, one for the hotel and one for a restaurant, according to records filed with the city. The division means the parcels can be sold individually, according to a spokesperson for the owner, Hersha Development.
“The owner of the property is exploring a sale of condominium interests in the project, but no decisions have been finalized,” the spokesperson said, but declined to provide further details. Hospitality investors Hasu Shah, Bart Mehta and K.D. Patel built the 116-unit hotel at 517 Lexington Avenue and 48th Street. Financing was provided by Hersha Hospitality Trust, a Pennsylvania-based real estate investment trust whose founders include Shah, Mehta and Patel. Hersha Development — an affiliate of Hersha Hospitality — inked a franchise agreement in 2010 to use the Hyatt brand.
Hyatt 48 Lex opened last fall, with the restaurant Lexington Brass in the retail space on the site. Lexington Brass is owned and operated by EMM Group, a restaurant management company.
The condominium structure was created in December, but the corresponding documents appeared in city records May 2.
In commercial buildings across the city, selling off retail condos is an increasingly common way to maximize the value of store and restaurant space, brokers said.
Last December, the developer of the 1.1-million-square-foot office building 11 Times Square filed plans to divide the tower into separate office and retail condos. A month earlier, the owners of the 282,000-square-foot Knickerbocker Hotel near Times Square split that property into one hotel and two retail condos, then sold the hotel portion for $115 million.
Selling the retail portion of a hotel is one way to lower developers’ expenses there, said Morris Moinian, a hotel developer and president of Fortuna Realty Group.
“There is a substantial benefit with cashing out the retail condo to lower the mortgage burden on the hotel portion,” explained Moinian, who is not involved at Hyatt 48 Lex.
The average daily room rate for the East Side of Manhattan between 42nd and 59th streets rose in March by 5 percent to $252.51 per night, compared with the same month in 2011, according to data from PKF Consulting USA. Hyatt 48 Lex has rooms available this month starting at $395 per night, according to its website.
Hyatt declined to comment and referred calls to the owners.