The Real Deal New York

Ashford picks up Midtown hotel for $195M

REIT makes first NYC buy at a time when competitors are shedding assets
By Mary Diduch | January 23, 2019 12:30PM

Embassy Suites by Hilton New York at 60 West 37th Street and Ashford CEO Douglas Kessler (Credit: Ashford)

Ashford Hospitality Trust Inc. is officially in business in New York City.

The Dallas-based real estate investment trust paid $195 million to buy the newly built 310-room Embassy Suites by Hilton New York in the Garment District, the company announced Wednesday. It’s the firm’s first acquisition in the Big Apple.

“The hotel is a high-quality, well-positioned asset that we expect will benefit from the positive trends occurring in the dynamic Manhattan market,” Ashford CEO Douglas Kessler said in a statement.

Ashford also said it secured a $145 million non-recourse mortgage at closing. Sources said Starwood Property Trust provided the loan.

The 41-story hotel, co-developed by Hidrock Properties and the Buccini/Pollin Group, opened last year on West 37th Street. AIG Global Real Estate owned the majority stake in the property.

AIG declined to comment.

The hotel, on a trailing three-month basis as of Dec. 31, 2018, saw revenue available per room of $254, Ashford said in its announcement. It had 92 percent occupancy and an average daily rate of $276.

The acquisition comes at a time when most hospitality REITs are selling assets, rather than buying them.

In September, Bloomberg reported that AIG was trying to offload the Embassy Suites for $200 million.

Eastdil Secured brokered the sale. A representative for the firm declined to comment.

Hotel fundamentals in Manhattan began to turnaround last year after a three-year slump caused by an influx of new supply. In 2018, RevPar grew by 3.4 percent year-over-year to about $229, according to hotel-data firm STR. The average daily rate increased 2.7 percent over the same time period to more than $262 per room.

New supply could also be constrained going forward. The city council recently passed a requirement that developers get a special permit to construct hotels in light manufacturing zones.