NYC Hotel Investments Report 2012

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.

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.

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 42^nd 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.  

January 31 – Situated at 52-54 West 36^th 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 31^st 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.

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. 35^th 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 – 31^st 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).