The Real Deal New York

Lone Star inks $85M Hilton hotel ground lease

Deal gives it control of land at 304 East 42nd Street until the year 2089

February 18, 2014 04:17PM
By Adam Pincus

Hilton

Hilton Midtown East at 304 East 42nd Street

An affiliate of the Dallas-based Lone Star Funds signed a nearly 76-year ground lease valued at $85.2 million for the land under the Hilton Manhattan East hotel.

The Lone Star entity, known as PNY III LLC, signed a lease starting on January 27, with the property owner, Tudor Equity Associates, a New Jersey company whose members include Michael Goldberg and David Dubrowski, city property records filed Feb. 14 show.

Lone Star acquired an interest in the ground lease under the Hilton, a 300-room hotel located at 304 East 42nd Street, between Second Avenue and United Nations Plaza, through a roundabout process.

The large hotel investment firm Procaccianti Group based in Rhode Island and the California public employees pension fund, CalPERS, purchased the ground lease for the hotel in 2007 for $107.25 million, information from city records shows and Real Capital Analytics shows. The pair bought the ground lease from a joint venture of Carlyle Group, Goldman Sachs’ Whitehall Fund and Highgate Holdings. At the time, the ground lease had 42 years remaining, according to RCA.

Procaccianti took out two loans totaling $86.1 million from Anglo Irish Bank, city records show.

Loan Star Funds acquired a package of non-performing loans from Anglo Irish Bank in 2011, the Wall Street Journal reported that year. It acquired this loan in 2011, but it was not clear it it was non-performing.

Then in January, Loan Star inked this new lease, replacing that older lease, which extends it to Dec. 21, 2089.

Lone Star declined to comment. A spokesperson for Procaccianti said the company remains an owner and operator of the hotel, but declined to comment further. CalPERS and Hilton did not immediately respond to a request for comment.

  • http://www.redagroupre.com/blog Jonathan Yunason

    Wow. Very interesting deal. So basically Procaccianti Group had to give back the lease bc they could not keep up with both morgage and lease payments. Then the owners did a deal with lone star with longer lease terms.

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