Watermark Capital has found a taker for the struggling Holiday Inn in Chelsea.
Two Kings Real Estate bought the 226-key hotel from the Chicago-based investment firm for $80.3 million, according to city property records filed Tuesday. Two Kings principal Christopher Wang signed for the buyer. Brendan Medzigian, Watermark’s head of transactions, signed for the seller.
Two Kings acquired the property at 125 West 26th Street for 30 percent less than the $113 million Watermark paid Magna Hospitality for the hotel in 2013. The New York-based real estate operator did not immediately respond to a request for comment.
Watermark had been looking to sell the indebted hotel since January in an effort to cut its financial losses. The national hotel investor fell behind on its mortgage payments in October 2020 and the loan was transferred to a special servicer in January 2021. At the time, the property’s value was appraised at $78.4 million, slightly more than its $72 million loan.
The firm had avoided foreclosure by negotiating with its lender, but it was expected that a buyer would need to pick up the balance of Watermark’s loan.
The Holiday Inn, located between Sixth and Seventh Avenues, has managed to stay open for most of the pandemic. However, the hotel has struggled to make up for lost revenue as the city’s hospitality industry has slowly recovered.
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After sporting an average occupancy rate of 92 percent in 2019, the hotel was only 54 percent occupied as of this past fall, and its cash flow had turned negative. Built in 2006, the 64,800-square-foot property spans 24 floors.
The sale of the Holiday Inn in Chelsea is the latest transaction in which a seller has had to offload a hotel for far less than what they bought it for.
The Hilton Times Square was bought by Apollo Global Management and hospitality investor Newbond Holdings for about $85 million — just slightly more than one-third of its $242.5 million sales price from 2006.
The Times Square Sheraton was purchased by MCR Investors for $323 million from Host Hotels & Resorts. While it was the city’s largest hotel deal in two years, the property sold for $415 million less than what Host had paid for it in 2006 when the economy and tourism were strong.
New York City’s hotel sector is expected to continue its recovery this year, but is unlikely to reach pre-pandemic levels before 2024. The Hotel & Lodging Association and Kalibri Labs in April estimated hotels would generate $2 billion from business travel in 2022, less than half of the $4.5 billion they accumulated three years ago.