The holders of a 75-year-lease for the Marriott Marquis Hotel in Times Square have opted to buy the hotel from the state-run Empire State Development Corporation for a mere $19.9 million — in a transaction that city Comptroller John Liu called “one of the worst deals since Manhattan was sold for $24.”
Host Hotels & Resorts, an owner of numerous Marriott-operated hotels, closed on title to the property on Tuesday, according to public records filed with the city today. EDS did not immediately respond to a request for comment.
Host has leased the property since 1982, when it entered a deal with both the ESDC and the city for the premises at 1535 Broadway between 45th and 46th streets. Under the agreement, Host would pay $34 million for the hotel, transferring title immediately back to the city, and then pay the city rent each year for 75 years. Host also had an option to repurchase the property for fair market value once the lease expired.
In 1998, the parties amended the agreement, shortening the lease term to 40 years — so it would expire in 2017 — and providing Host a chance to buy the building for a fixed $19.9 million as soon as 2013.
“If these reports are accurate, it is no surprise that anyone would want to snap up that prestigious New York City property for such a relative pittance, and just in time for Christmas,” Liu said in a statement to TRD today. “But this corporate giveaway was a horrendous deal for City taxpayers that could have and should have been renegotiated.”
Earlier this year, in an audit of the deal, Liu said the building was really worth close to $200 million, but recent deals suggest it could be worth much more.
In a statement to The Real Deal, a Host spokesperson defended the price it paid to take title back on the property, noting that its long-term investment created 1,500 jobs and brought in millions in tax dollars.
“The purchase price reflects the fact that Host has paid over $1 billion to the city and state in rent, taxes and acquisition costs since the project began, including every penny owed under its ground lease. The bottom line is that we have paid all sums due under the terms of the lease agreement,” the spokesperson said.
Meanwhile, Vornado Realty Trust, inked a 20-year deal to lease the retail space below the tower last year and will spend as much as $140 million to expand the retail component of the property, converting the underground parking lot into additional selling space and creating a six-story, 300-foot-long LED sign, as previously reported. The lease gives Vornado the option to buy the retail in the future at a price to be determined by the cash flow of the space.
In recent hotel transactions in and around Times Square, private equity firm the Rockpoint Group last year paid $275 million, or more than $400,000 a key, for a 665-room hotel at 790 Seventh Avenue, and a partnership of Apollo Global Management and Chartres Lodging Group bought a 480-room at 226 West 52nd Street for $94 million, or less than $200 a key.
The 58-story, 1.8 million-square-foot Marriott Marquis has close to 2,000 rooms and features 100,000 square feet of meeting space.