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NYC Hotel Investments Report 2012

NYC Hotel Investments Report 2012


New York City Hotel Sales – 2012

At the beginning of 2012, a robust demand is evident in buying and selling New York City hotels. Whether lodging properties are new, fairly new, or landmark buildings, the NYC hospitality sector is a dynamic marketplace. NYC hotels are expected to maintain or even exceed the popularity they enjoyed during 2011. Note that hotel sales in the Big Apple showed a five-year high in 2011 – an increase of 148% from 2010 and a 524% rise over 2009.

The Avalon Hotel

January 26 – Domain Properties has closed on the sale of the Avalon, a midtown luxury hotel located at 16 East 32nd Street. Haim Yagen, Domain’s principal, represented the seller and buyer. This upscale four-star, 12-story, 100-room, 71,250-square-feet building is a unique hotel in a prime Manhattan location. Prior to the acquisition, the property was managed by Vincci Hotel Management.

Hampton Inn 35th St. Empire State Building

January 3 – Magna Hospitality (private operating company) sold the 146-room upscale Hampton Inn 35th St. Empire State Building to RockBridge Capital (institutional investment advisor) for $69,500,000 ($476,027 per room).

Novotel Hotel Times Square

January 19 – The 480-room Novotel Hotel Times Square was sold by Accor SA (public operating company) to Chartres Lodging Company (private operating company) and Apollo Global Management (opportunity fund) for a sale price of $91 million. The broker for the deal was Jones Lang LaSalle. Apollo and Chartres will spend a huge $86 million (almost as much as the sale price) to renovate the Midtown hotel. The overhaul will upgrade the property’s air-conditioning system, refurbish its lobby and restaurants, revamp the guest rooms, as well as add a meeting space and suites, along with other changes. The hotel will remain open during renovations. Accor maintains a 25-year managing agreement.

Cassa Hotel & Residence

January 20 – Assa Properties (public operating company) announced the sale of the hotel portion of Cassa Hotel and Residence at 70 West 45th Street to HNA Property Holding Group (government entity) for $130,000,000 ($787,879 per room). The Chinese corporation, HNA Property Holding Group, plans minor renovations for the hotel. In addition, the buyers will rebrand the stylish Midtown Manhattan property as a boutique luxury four-star managed by Viceroy Hotel Group.

The upscale property will be part of the Urban Retreat Collection. Designed by famous architect Enrique Norten of TEN Arquitectos and CetraRuddy, the hotel features a distinctive lobby leading to an impressive catwalk suspended over the restaurant. The property has 165 luxury rooms and suites including studios and deluxe rooms as well as junior and executive suites. Irene Mamiye’s impressionist photography can be found in each room. The elegant bathrooms offer limestone and sleek fixtures and Frette linens for the ultimate guest experience.

Viceroy Hotel Group (known for its culinary heritage) will partner with the innovative BLT American Brasserie at the hotel. The new restaurant by renowned Chef Laurent Tourondel will feature a classic American menu.

Located a block from Times Square, Cassa occupies a prime location to attract business and leisure travelers – and an excellent opportunity for HNA. Meanwhile, the 57 luxury Cassa residences are still owned by Assa Properties.

Knickerbocker Hotel

January 31 – Built in 1906, the landmark Knickerbocker Hotel at 6 Times Square was sold by Walton Street Capital LLC (opportunity fund), Ashkenazy Acquisitions Corporation (private operating company) and Crown Acquisitions (private REIT) to FelCor Lodging Trust Inc (public REIT) and Highgate Holdings LLC (private operating company) for $230,000,000 ($696,970 per room).

FelCor (owner of 76 U.S. hotels) and Highgate Holdings created a 95%/5% joint venture. The midtown Manhattan property is divided into three sections – one hotel and two retail parts. FelCor/Highgate JV bought the hotel condo (the top 14 floors) for $115 million. The property’s first two stories (occupied mostly by a Gap) are still owned by the investment group that sold the hotel to FelCor.

FelCor bought 95% stake for $109 million. Highgate (hotel managers) has a 5% stake. With this purchase, FelCor becomes the proud owner of three NYC hotels. In 2011, the public REIT bought two of the city’s trendiest properties – the Royalton and Morgans Hotels for $140 million.

FelCor is one of several hotel companies hoping to take advantage of New York City’s strong tourism industry. According to Smith Travel Research, New York has an average hotel occupancy of 77% and the average rate of $60.1% and $61.06. In fact, Manhattan hotels are thriving despite a flood of new competitors in the marketplace. Lodging Econometrics announced that Manhattan’s supply of rooms rose by 7.5% in 2010 and 2% in 2011 to over 77,000 rooms. The research company expects more increases of 2.8% during 2012 and 2013.

The current joint venture of FelCor and Highgate Holdings plans to spend another $115 million to change the Beaux Arts building at 42nd Street and Broadway back into a luxury hotel by late 2013. In recent years, the property has served as an office building. Redevelopment will be funded by a construction loan. The redevelopment strategy has been approved by New York City’s Landmarks Commission as well as New York City’s Board of Standards and Appeals.

Hotel renovations extend to restaurants, rooftop bar, meeting rooms, a fitness center, and 400 square feet guest rooms. In the immediate future, FelCor plans to operate the property as an independent hotel under the Knickerbocker name. Although the NYC hotel industry is a competitive industry, the Knickerbocker’s location is one of the best in the city.

According to John Fox, senior vice president in New York for PKF Consulting USA LLC, a company that tracks the lodging industry.  

Ritz-Carlton Hotel

January 31 – The 259-room luxury Ritz-Carlton at 50 Central Park South has been sold to Westbrook Partners (private operating company) by Millennium Partners (private operating company who own other Ritz-Carlton properties in New York, Washington, and Boston). The $105,000,000 sales tag means an average price of $405,405 per room. The Ritz-Carlton (the former St. Moritz Hotel) includes several separately owned condos (The Residences at Ritz-Carlton) taking up 12 stories and 80,457 square feet of the 33-story, 324,293 square-foot building. The Ritz-Carlton (as well as other NYC hotels) is one of the world’s most sought-after properties.

Hyatt Place New York Midtown South

January 31 – Situated at 52-54 West 36th Street, the 185-room Hyatt Place New York Midtown South was purchased by Chesapeake Lodging Trust (public REIT) from McSam Hotel Group (private operating company) for $76,500,000 ($413,514 per room). Closing for the take-out deal is expected after the completion of the hotel (possibly in the third quarter of this year) and satisfaction of usual closing regulations. As well as the planned purchase, the Trust will provide the seller with $6.5 million in bridge financing to finish the hotel. The Trust plans to create a management plan with Real HospitalityGroup, the operator of the Trust’s other NYC hotel on 31st Street in Midtown.

Upon completion, the Hyatt Place New York Midtown South will offer the ultimate in décor and comfort to business and leisure guests in the dynamic Midtown. Each room will have a central HVAC system and updated bathrooms with glass-enclosed showers and granite vanity tops. All guest rooms will feature a 42’ high definition flat panel television, luxurious Hyatt Grand Bed, state-of-the-art media and work center, as well as a refrigerator, wardrobe, and comfortable seating areas. The hotel will have 27 double-bedded rooms, 158 king-bedded rooms, and four king-bedded rooms on the top floor with access to adjacent private terraces.

The relaxing and casual hotel lobby Gallery is a contemporary area providing distinct architecture and unique furnishings. The Gallery has a check-in kiosk, cozy Bakery Café (offering fresh snacks, tasty entrees, and specialty coffee drinks, as well as a full wine and cocktail bar) and a TV den with gathering spaces and an e-room with complementary computer and internet access and printing.

Record-Breaking Tourism in New York City

An amazing optimism abounds in the New York City hospitality industry. Recently, Mayor Michael R. Bloomberg and NYC & Company (New York City's official marketing and tourism organization) announced that the Big Apple welcomed a record-breaking 50.5 million visitors in 2011- a figure even higher than the original projections of 50.2 million. Even in the midst of winter, the unusually favorable temperatures last December and at present in February are encouraging tourists to come to New York City - the city with the highest tourism spending.

Even in the US, New York City is the number one metropolitan tourist destination. Hotel occupancy rates rose to 85% by the end of December 2011. Of course, business travelers are always on the move in New York City. All guests (leisure and business) can look forward to finding sensational deals in NYC hotels during January and February.

Dynamic NYC Hotel Industry

The following quote by Nicholas Clayton of Viceroy Hotel Group is just one example of the widespread optimism about NYC hotels in 2012.

“We are excited to start the year by announcing Viceroy Hotel Group’s new Manhattan property, and we very much look forward to welcoming new and existing guests to the Cassa Hotel.”

And more…NYC Hotel Sales

  1. Magna Hospitality and Rockbridge Capital have purchased the Wyndham Garden Hotel – Times Square for $82.5 million ($366,666.66 per key). The new owners plan to rebrand the hotel as DoubleTree by Hilton. Earlier this year, the Ohio-based RockBridge Capital bought the 146-room NYC Hampton Inn at 59 W. 35th St. without brokers for $69.5M (about $476,027 per room) from Magna Hospitality. The sale price seems to be in line with other New York City hotel sales. Alan Assaf, investment manager for RockBridge, explains that both companies had a “prior relashionship.” Magna will continue to operate the hotel.
  2. Chesapeake Lodging Trust has closed on their previously announced acquisition of the newly developed, 18-story, 122-room Holiday Inn New York City Midtown – 31st Street ( the Trust’s first NYC hotel) for a purchase price of $52.2 million (approximately $428,000 per room). The Trust funded the purchase with financing under its revolving credit facility. Real HospitalityGroup will manage the hotel. Considering the thriving market for Manhattan hotels, operator’s experience in hotel management, and strong IHG reservation system, James L. Francis, Chesapeake’s President and Chief Executive Officer, has high hopes for the Trust’s latest hotel. Each guest room has a central HVAC system and spacious upgraded bathrooms with glass tile walls, inset framed mirrors, glass-enclosed showers, and upgraded vanity and hardware, as well as large ceramic tile flooring. The hotel contains 94 king rooms, 20 double-bedded rooms, six standard rooms equipped for ADA access, and two suites. In addition, the property features a roof top bar with unobstructed views of the Empire State Building and the Manhattan skyline. The Trust leases space on the first floor to Contorno’s Restaurant (an 80-seat, upscale Italian restaurant and bar).

  • 43 West 33rd Street Suite 200
    New York NY 10001

  • Phone: 212-741-9700
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