The pace and volume of hotel transactions have picked up in New York as hotel operating fundamentals continue to improve across the city. In the first four months of 2022, hotel transactions totaling $1.2 billion were announced, though values are significantly below prior peaks for the same assets.
Key asset transactions that have occurred from January through April reflect an average decline in value of 42% compared to the previous trades.
Sonesta Hotels acquired a portfolio of four Manhattan hotels totaling 918 rooms. The Benjamin, the Shelburne Hotel & Suites, the Gardens Suites Hotel and the Fifty Hotel & Suites were sold by Denihan Hospitality Group for an undisclosed price. The lender, Ramsfield Hospitality Finance, announced that it provided Sonesta with a $239 million acquisition loan for the deal. In 2016, Denihan refinanced the four hotels with a $320 million loan from Goldman Sachs. If Goldman and Ramsfield financed the portfolio at the same loan-to-value ratio, that would indicate an approximately 25% decline in value.
Along with launching the Sonesta brand in New York across four locations, the deal also included the intellectual property for The James Hotels brand. Sonesta intends to scale The James Hotels brand as a lifestyle option within the Sonesta portfolio.
Another recent notable transaction was the Sheraton New York Times Square, the third-largest hotel in the city with 1,780 rooms. MCR and Island Capital Group acquired the hotel for $373 million, or $210,000 per key, representing a 50% discount to the previous transaction price. Host Hotels and Resorts had originally acquired the hotel in 2006 for $736 million, or $414,000 per key.
The Midtown DoubleTree on Lexington Avenue was sold by RLJ Lodging Trust to Hawkins Way Capital for $169 million, or $221,000 per key. This represents a value decline of just under 50%, as RLJ had initially acquired the hotel in 2011 for $335 million, or $438,000 per key.
The Mandarin Oriental on Columbus Circle is under contract to be sold to Reliance Industries for $98 million for a 73.4% stake in the asset. The buyer will also assume current debt of $115 million, valuing the asset at $270 million, or $1.08 million per key. The Investment Corporation of Dubai had acquired the hotel in 2007 for $340 million, or $1.4 million per key; Reliance’s acquisition price represents a 42% discount to the previous trade.
In January, the Andaz Wall Street sold for $85 million, or $337,000 per key. Navika Capital acquired the hotel from The Hakimian organization, and is converting it to a Hyatt Centric.
The Gregory Hotel at 42 W. 35th St. sold at a foreclosure auction for $33.9 million, or $257,000 per key, a 44% decline in value compared to the original sponsor’s basis. Meadow Partners had purchased the hotel in 2014 and spent $60 million to acquire and renovate it, resulting in a basis of $454,000 per key.
The pace of transactions is expected to accelerate throughout 2022 as hotel performance improves and as the market continues its recovery, driven by international visitors and summer leisure travel.
Leisure travel has begun to rebound in the first quarter, with the market loosening restrictions following the end of the omicron wave and popular tourist attractions like Broadway reopening. However, a recovery for business travel, one of the largest sources of revenue for the U.S. hotel industry, is not expected before 2023.