W Union Square

The W New York-Union Square has sold for $185.25 million, according to city records, in a deal that closed Sept. 2. The buyer of the hotel, at 201 Park Avenue South, is Host Hotels & Resorts, a publicly traded real estate investment trust based in Bethesda, Md. LEM Mezzanine, a Philadelphia-based mezzanine lender that acquired W Union Square in a 2009 foreclosure sale, reached an agreement to settle a series of bankruptcy cases and sell the property to a new venture, led by Host, LEM announced in July. The special servicer of the hotel’s $115 million mortgage, LNR Partners, sought in court papers last month to block a plan that would transfer ownership of the hotel to Host, which owns 109 hotels, or 60,000 rooms globally and owns a stake in a joint venture that owns 11 hotels in Europe, with 3,500 rooms. The firm owns properties under various brands, including Four Seasons, Ritz-Carlton, Westin, Hilton and Marriott. TRD

[more]

W New York – Union Square

LEM Mezzanine, a Philadelphia-based mezzanine lender that acquired W New York – Union Square
in a 2009 foreclosure sale, has reached an agreement to settle a
complicated series of bankruptcy cases and sell the property to a new
venture, led by Host Hotels [more]

The 270-room W Hotel in Union Square changed hands in December after the private equity division of Dubai World defaulted on a $117 million mezzanine loan. But the lender, LEM Mezzanine, could lose the hotel in the coming months as a result of its filing for bankruptcy protection earlier this year, the New York Times reported. Mezzanine loans, which are secured by stock or other ownership stakes in a company, became a popular form of secondary financing during the real estate boom, offering high returns to investors and high interest rates for borrowers. There is an estimated $100 billion in mezzanine loans outstanding across the country. But despite built-in risks, lenders say these loans are beginning to resurface. “It’s become something people want to do again,” said William Shanahan, a vice chairman at CB Richard Ellis who specializes in investment properties in New York. “I think it’s fair to say that right now the desire to place mezzanine debt outweighs the demand for it, but a lot of people are looking to put mezzanine loans on their properties.” Since mezzanine loans come second in priority to the first mortgage and are typically secured by stock in the company, many building owners who financed property at the height of the real estate bubble, including the proprietors of the W Hotel, were at the mercy of mezzanine lenders after the economy soured. [NYT]

[more]

The new owners of the W New York-Union Square hotel threw the troubled property into bankruptcy protection Tuesday afternoon, the day before senior lender DekaBank was scheduled to auction off a loan on the hotel.
LEM Mezzanine, a Philadelphia-based private equity fund, previously bought the 270-room property in December for $2 million, plus the assumption of $212 million in debt, in a so-called mezzanine foreclosure auction. The W, located at 201 Park Avenue South, was auctioned off after the Dubai financial crisis left Isithmar, the private equity arm of state-controlled Dubai World, scrambling to sell assets. “Efforts to restructure the remaining mezzanine debt have not yet been completely successful,” LEM said in a statement. “Today’s filing was intended to provide additional time to complete that process, and emerge with a healthy balance sheet that allows the hotel to continue to thrive in a competitive marketplace.” Comments

• Tweet

Direct impact of Dubai crisis on New York City is limited, experts say

As the international credit crisis spread into the kingdom of the United Arab Emirates, real estate experts said that while any direct impact on New York would be limited, it may signal the inability of sovereign wealth funds to bail out distressed assets here. The financial world briefly shuddered last week after Dubai World, the main investment arm of the powerful Gulf region city-state, asked lenders for a six-month suspension of nearly $60 billion in debt payments. Analysts say the suspension may force Dubai to sell many of its trophy assets around the world, including several high-profile buildings in New York, like the Jumeriah Essex House, the former Knickerbocker Hotel and the flagship W New York-Union Square hotel, whose mezzanine debt is scheduled for a Dec. 8 foreclosure auction. “Dubai got drunk with debt just like we did here in New York,” said Dan Fasulo, managing director of research at Manhattan-based investment research firm Real Capital Analytics. “A lot of people think Dubai [was financing its deals with] oil. In actuality, it was very much of a debt-fueled building boom.” [more]