David Werner, Highgate Put Row Hotel Up For Sale

Manhattan’s massive Row hotel has been a tangle of defaults and disputes in recent years. Now, the various investors involved are working together to try and sell the 1,331-key property for around $350 million.

An investment group led by David Werner, which owns the ground underneath the hotel at 700 Eighth Avenue, is jointly marketing its interest along with a group of investors led by Highgate and Rockpoint Group, which own the long term lease controlling the hotel itself, sources told The Real Deal.

The joint offering would allow a new buyer to come in and consolidate ownership, and makes each piece more valuable than it would be on its own.

But it took time and trouble before everyone got on the same page.

Werner’s group defaulted on its $275 million mortgage in 2020 and is facing foreclosure on its fee interest. Werner’s lender is essentially driving the deal now; the two sides have agreed to put the property up for sale, according to sources familiar with the process.

The Highgate group, meanwhile, has struggled with operating the hotel but has paid down their debt — giving themselves full control to sell their interest along with the ground underneath.

Representatives for the parties declined to comment. An Eastdil Secured team led by Scott Ellman and Jeff Davis is marketing the hotel. A spokesperson for the brokers declined to comment.

The hotel has recently been used by the Adams administration as a shelter for migrant families. The city signed a $40 million contract in late 2022 to rent out the hotel. At the start of this year the city began evicting some of the first families to arrive, but it looks as though the shelter is still in place.

Before the city took over, the aging hotel — built in 1928 — had seen its struggles: First with a flood of new supply that had softened Manhattan’s hotel market, then with the Covid shutdown in 2020.

The byzantine structure of the hotel led its problems to multiply. Once the Highgate/Rockpoint group fell behind on payments, the Werner group couldn’t pay its mortgage. Wells Fargo filed to foreclose as trustee on the CMBS loan, which is special serviced by LNR Partners.

The complicated structure began when Highgate and Rockpoint paid $200 million to buy the property in 2010.

They sold the ground underneath the hotel to Werner and Deutsche Asset & Wealth Management for $325 million in 2013. The following year, they sold the retail condo at the base of the building to Thor Equities for $64 million. (Thor defaulted on the loan and the lender, Paramount Group, took over the retail portion in 2022.)

The third prong of Highgate/Rockpoint’s plan was to sell the hotel itself. They put it up on the market in early 2019, eyeing a price tag of $220 million, but no sale materialized.