Hotel market shows signs of life in NYC

By Michael Stoler | February 23, 2010 02:26PM

Occupancy and average daily rates are on the rise for New York City hotels, as well as the velocity of sales of hotels in New York City.

New York City posted the largest occupancy increase among the top 25 markets, rising 15.9 percent to 65.5 percent, according to Smith Travel Research data for the week ending Feb. 6.

So far this year, Pennsylvania-based Hersha Hospitality Trust and a Northern Mariana Islands-based alone have purchased five New York City hotels.

Hersha, owner of upscale, mid-scale and extended stay hotels, announced that it closed on the acquisition of three newly-opened hotels in Times Square. The company acquired the Hampton Inn, Candlewood Suites and Holiday Inn Express Times Square. The total price for the three Times Square properties was $165 million, including 1.5 million units of limited partnership interests that were issued to the sellers.

Jay Shah, CEO of Hersha, said, “We were able to acquire the Holiday Inn Express in Times Square for an incremental $55 million, thereby lowering our basis for the three hotels to approximately $284,000 per key, which is below replacement cost and is expected to further increase our initial cash yield on the investment.”

In January, Hersha hospitality trust refinanced its hotel in Tribeca, the Hilton Garden Inn, which opened in January 2009 and which Hersha has owned since June 2009. The company refinanced the $29.8 million mortgage, with a new five-year non recourse loan of $32 million at a rate of 8.25 percent. The lender for the loan was Apollo Commercial Real Estate Finance, the mortgage REIT of Apollo Global Management.

As opposed to acquiring new hotels in New York City, Starwood Hotels & Resorts Worldwide, one of the leading hotel and leisure companies in the world with 982 properties in more than 100 countries, sold the 198-room W New York-Court at 130 East 39th Street on the corner of Lexington Avenue and the 122-room W New York-Tuscany down the block at 120 East 39th Street between Lexington and Park avenues. According to sources, they traded for approximately $75 million combined, or about $275,000 per key. (Note: correction appended.)

Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.