New York’s 725-room Lexington Hotel, which once counted guests including Yankees Hall of Famer Joe DiMaggio and Hollywood icon Marilyn Monroe, was sold for $185.3 million by DiamondRock Hospitality Co.
Without identifying the buyer, DiamondRock, a lodging-focused real estate investment trust, said it plans to use the proceeds for the property, located at the intersection of 48th Street and Lexington Avenue, to buy “high-growth experiential resort and urban lifestyle hotels” that fit in with its investment strategy.
The deal “right-sizes our portfolio’s exposure to New York City,” Mark Brugger, president and chief executive of DiamondRock, said in a statement.
DiamondRock’s sale highlights the struggles facing the hospitality industry during the COVID-19 pandemic, especially in key cities such as New York. In May 2011, when the REIT agreed to buy the hotel for $335 million, it said at the time the hotel’s projected nearly $200 revenue per available room was 70% above its portfolio average. Brugger said then the hotel would increase its exposure to the “dynamic Manhattan market.”
In contrast, the Midtown East market, where the hotel is, has seen its 12-month revenue per available room slump 81% to an average of $41, according to CoStar data.
DiamondRock, which said it has 29 “premium quality” hotels with over 8,800 rooms, in May reported its comparable first-quarter revenue dropped 57% from a year earlier while revenue per available room fell 54.4%.
In addition to the Lexington, DiamondRock in April also sold Frenchman’s Reef & Morning Star Marriott Beach Resort in the U.S. Virgin Islands.
At the time of the earnings announcement, the REIT said these two sales will help it increase “the portfolio allocation to experiential, drive-to resorts and lifestyle hotels” as its urban hotels were responsible for the quarterly loss.
Still, with increased vaccinations and loosened restrictions, DiamondRock is seeing improvement. It said in May it’s “rapidly returning to profitability.” “We fully expect a strong return of travel demand throughout the balance of the year and setting up for a major increase in all segments of hotel demand in 2022,” Brugger said at the time.
Gross operating profit for U.S. hotels reached 70% of the comparable 2019 level, according to hospitality data provider STR in a report, adding each of the industry’s key profitability metrics on a per-available room basis came in higher than any month since February 2020 except for labor. STR is a unit of CoStar Group, parent of CoStar News. Booking trends for New York’s new Margaritaville Resort Times Square also have pointed to improved market trends.
Originally named Hotel Lexington, the Lexington Hotel, under Marriott’s Autograph Collection brand, has been the home of several Hollywood celebrities since it was built in 1929, including Dorothy Lamour, who is best remembered for appearing in the “Road” series alongside Bing Crosby and Bob Hope, according to the hotel’s website.
DiMaggio and Monroe lived in Suite 1806 — now called the Norma Jeane Suite after Monroe’s birth name — at Hotel Lexington during their brief marriage in the 1950s, the hotel said.