The Real Deal New York

LA-based BH Properties to pay $300M-plus for land beneath three NYC hotels

Element Times Sq., Sheraton Tribeca and DoubleTree FiDi have nearly 1,200 rooms total
By Mark Maurer and Hiten Samtani | September 20, 2016 04:20PM

From Left: 311 West 39th Street, 372 Canal Street and 8 Stone Street(inset from top: T. Wilson Eglin and Steve Gozini)

From Left: 311 West 39th Street, 372 Canal Street and 8 Stone Street (inset from top: Lexington Realty Advisors’ T. Wilson Eglin and BH Properties’ Steve Gozini)

BH Properties, a Los Angeles-based commercial real estate investment firm, is breaking into New York City in a big way. The company is finalizing a $300 million-plus deal to acquire the land beneath three hotels from Lexington Realty Trust, The Real Deal has learned.

The company is in contract to buy the fee interest for a portfolio of hotels, sources said, including the 39-story, 411-key Element New York Times Square West at 311 West 39th Street; the 21-story, 369-key Sheraton Tribeca New York Hotel at 372 Canal Street; and the 40-story, 399-key DoubleTree Financial District at 8 Stone Street.

Together, the hotels, which opened in 2010, hold 1,179 rooms and span more than 480,000 square feet.

The properties are net-leased to tenants under 99-year ground leases, which are set to expire in 2112.

Just three years ago, Lexington, a Midtown-based real estate investment trust, bought the three parcels from Magna Hospitality Group for $302 million. At the time, initial annual rents under the leases totaled about $14.9 million, according to a Lexington earnings call.

Fast-forward to February 2016: On an earnings call, Lexington CEO T. Wilson Eglin said the REIT plans to sell as many as 30 properties this year in an effort to generate up to $700 million in proceeds. In May, the REIT sold the land under the Holiday Inn Express at 15 West 45th Street in Midtown for $37.5 million.

The land beneath the three hotels are encumbered by $213 million in debt provided by Cantor Commercial Real Estate Lending, Commercial Real Estate Direct reported. That debt matures in 2027.

In the past year, Singapore-based Ascott Residence Trust has acquired the leasehold interest from Magna for two of the hotels: $163.5 million for the Element hotel and $158 million for the Sheridan.

Eastdil Secured TRData LogoTINY, which was marketing the fee interest, declined to comment, as did the buyer and seller.

BH Properties, founded in 1994 and led by Steve Gozini and Ronald Platisha, has offices in Los Angeles, Dallas and Salt Lake City. It has known interests in 71 assets with an estimated value of $695 million, according to Real Capital Analytics.