The Real Deal New York

Midtown hotel mania

A roundup of the recent hotel deals in NYC’s most active hospitality market

August 01, 2011
By C.J. Hughes

During the boom, when no Manhattan neighborhood seemed vulnerable to the economy, hotel deals seemed to pop up on every corner of Manhattan — no matter how far-flung.

Now, though, as the market recovers, deal-making in Manhattan’s chief central business district — Midtown — has seen more hotel activity, and larger deals, than any other part of Manhattan, sources say.

The area — which stretches from 34th to 65th streets and river to river — has seen “a number of high-dollar-amount deals,” said John Fox, a hotel industry specialist at PKF Consulting.

A handful of these Midtown deals involve ground-up construction of new hotels, though most involve investors and developers snapping up older properties, including brands like the Algonquin and the Paramount, with the intention of renovating them.

Midtown’s hot streak has been partly fueled by hotel-focused real estate investment trusts. Those REITs have been especially active in the area during the last year and a half, as the stock market has roared back.

Fox said these national, deep-pocketed investors like to deploy their capital in large fell swoops, and Midtown’s hulking, big-ticket hotels provide those kinds of spending opportunities.

“One $100 million deal is much better than four $25 million deals,” Fox said.

And there are plenty of other non-REIT investors swooping in, too.

That’s partly because the value of the dollar remains weak against European currencies, which delivers a one-two punch benefiting New York hoteliers — not only do international travelers find it affordable here, but Americans are now, say, skipping a long weekend in Paris for one on Columbus Circle.

Here’s a look at some of the recent Midtown hotel activity.

Doubletree Guest Suites

1568 Broadway (460 rooms):

Sunstone Hotel Investors bought this Times Square high-rise from Whitehall, a Goldman Sachs unit, and other owners for $286 million in January.

Ink48

653 Eleventh Avenue (220 rooms):

Situated inside a former printing plant, this hotel, part of the Kimpton chain, ran into trouble last fall when a bank foreclosed on its developer, Horizen Global. Eastern Consolidated is selling the mortgages on behalf of U.S. Bank National Association.

Paramount Hotel, 245 West

46th Street (600 rooms):

In a move that surprised many in the industry, embattled real estate mogul Aby Rosen hammered out a deal to buy this 1980s icon for $275 million from Walton Street Capital and Highgate Holdings. The deal is expected to close this quarter.

Yotel

570 10th Avenue (670 rooms):

An investment group led by the Kuwaiti IFA Hotels and Resorts paid the Related Companies $315 million in June for this “pod”-room property inside its new mixed-used project, MiMA.

Milford Plaza Hotel

700 Eighth Avenue (1,300 rooms):

The Rockpoint Group and Highgate Holdings teamed up to buy this Times Square mainstay (which many remember for its “Lullaby of Broadway” jingle) from Ogden Cap Properties for $200 million.

Four Points by Sheraton

326 West 40th Street (245 rooms):

Also in June, L.A.-based Gehr Development paid the Lam Group $112 million for this tower overlooking the Port Authority. Gehr owns the adjacent Fairfield Inn. While it does not plan to connect the two hotels, company president David Lifschitz said the central location and the fact that the firm owns the rooftop lounge that straddles both hotels was a selling point.

Cassa Hotel and Residences

70 West 45th Street (220 rooms):

Open for less than a year, this Enrique Norten-designed hotel-condo filed for bankruptcy this spring, as its owner, Assa Properties, became ensnared in disputes over unpaid contractor bills. But almost immediately after the bankruptcy became public, Assa announced that it had inked a “binding” contract to unload the hotel portion of the project for $130 million. The buyer was identified only as an “international investor.” As of press time, no sale had been recorded with the city.

Algonquin Hotel

59 West 44th Street (175 rooms):

In June, Cornerstone Real Estate Advisers, a MassMutual-owned investment group, closed on its acquisition of this landmarked building, famous for Dorothy Parker’s literary salons, from Connecticut-based HEI Hospitality, for $79 million.

The Royalton

44 West 44th Street (170 rooms):

As part of a one-two deal (see No. 11), FelCor also paid $87 million for this recently renovated hotel.

Palace Hotel

455 Madison Avenue (899 rooms):

Midtown’s famed Palace Hotel sold in May to the investment advisory firm Northwood Investors for around $400 million, or $445,000 per room.

Morgans Hotel

237 Madison Ave (110 rooms):

In April, FelCor Lodging Trust, a Texas-based REIT, shelled out $53 million for this boutique hot spot as part of the two-part deal with the Royalton. The REIT, which has been trying to find deals in major urban markets since the start of the downturn, issued millions of shares to help fund the buy, its first in New York.

New York Helmsley Hotel

212 East 42nd Street (770 rooms):

The signature address of Leona Helmsley’s empire was officially sold in March to Host Hotels & Resorts for $314 million by her estate. Host reportedly beat out 14 other bidders, including Tishman Hotel & Realty. The hotel will be renovated and turned into a Westin Hotels & Resorts in the middle of 2012.

Radisson Lexington

511 Lexington Avenue (710 rooms):

The REIT DiamondRock Hospitality purchased this property on a hotel-lined stretch of Lexington for roughly $335 million, or $471,000 a room, from a venture that included the Blackstone Group. The deal closed in June.

Doubletree Metropolitan

569 Lexington Avenue (760 rooms):

Black Entertainment Television founder Robert Johnson’s RLJ Development spent $332 million on the hotel near the end of 2010. The company, which went public in May, purchased it from Whitehall, which continued to divest itself of assets. The hotel last traded for $110.5 million in 2003.

Park Central Hotel

870 Seventh Avenue (935 rooms):

LaSalle Hotel Properties, a Maryland-based REIT, bought this hotel in June from a consortium including Whitehall Real Estate Funds, an affiliate of Goldman Sachs, for $406 million — the biggest recent deal in the area.

Buckingham Hotel

101 West 57th Street (100 rooms):

A real estate arm of UBS bought this 1929 edifice from a partnership that includes Equinox founder Danny Errico for $60 million last July. The property was closed in February for a two-year renovation.

Park Hyatt

157 West 57th Street (210 rooms):

Extell Development’s foray into hotels in NYC will be tucked inside one of the city’s most highly anticipated ground-up projects: One 57 from architect Christian de Portzamparc (see related story on page 58). The project is currently under construction.

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