W New York – Union Square hotel

LEM Mezzanine, a Philadelphia-based private equity fund, acquired Istithmar’s former W New York – Union Square hotel for $2 million, plus the assumption of $212 million in debt, in a foreclosure auction held in Manhattan this morning, marking the first major asset to be sold since the November debt crisis emerged in Dubai. LEM bagged the troubled property at 201 Park Avenue South after a brief bidding war in which Istithmar officials tried to buy the 270-room hotel on the condition that they not have to assume the hotel’s October and November debt payments. Sources at the auction told The Real Deal that the hotel would continue to operate under the W brand, while LEM would make an undisclosed amount of capital improvements and position the hotel for an eventual recovery of the New York economy. “Despite the recent downturn of the hotel industry, and the defaults that led to today’s foreclosure auction, we are optimistic about the future,” LEM’s affiliate company said in a statement. [more]