GFI Capital takes majority stake in James Hotel in $110M deal

Allen Gross’ firm also in talks to bring in $20M preferred equity investment in boutique NoMad property

New York /
Jun.June 16, 2020 02:15 PM
GFI Capital CEO Allen Gross and the James Hotel at 22 East 29th Street (Google Maps)

GFI Capital CEO Allen Gross and the James Hotel at 22 East 29th Street (Google Maps)

New York’s hotel market appears ripe for opportunity investors, as Allen Gross’ GFI Capital has upped its stake in the 337-key James Hotel in NoMad for what seems like a big discount.

GFI has picked up an additional 61-percent stake in the luxury hotel from a partner in a $110.5 million deal, the firm said in a Sunday disclosure to the Tel Aviv Stock Exchange. The cost of the deal includes the assumption of existing debt on the property, plus $14.5 million in cash. After having previously sold off a portion of its 30 percent stake in the property, GFI now controls around 80 percent of the hotel at 22 East 29th Street.

Although the identity of the seller is unknown, prior disclosures describe the former majority stakeholder as “a private real estate investment fund.”

The seller proposed the deal, which GFI said “presented an opportunity to purchase its stake on favorable terms.” It also required GFI “to protect its invested capital in the hotel from a transfer of the property by the capital partner to the lender,” the latest disclosure said.

GFI expects the favorable terms of the deal to have a positive impact on the company’s finances, though it is still examining the accounting implications with its advisers. The hotel was valued at $296.5 million in GFI’s latest annual report, while the buyout price implies a total property value of just $181 million.

Additionally, GFI notes in the document that it is negotiating with “an American institutional investor” for a $20 million preferred equity investment in the hotel, which it expects to close within the next three months.

A representative for GFI did not respond to a request for comment.

GFI and its partners acquired the boutique hotel — formerly known as the Carlton — from the Wolfson Group for $162.1 million in 2015, and reopened the 12-story property as New York City’s second James Hotel two years later.

Management company Denihan Hospitality Group had also held a minority stake in the hotel, according to disclosures at the time of the acquisition.

Apollo Commercial Real Estate Finance funded the 2015 acquisition with $138 million in senior debt, according to property records, as well as about $20 million in subordinate debt according to Apollo’s SEC disclosures.


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