NYC transaction market heats up

NEW YORK—It’s been well chronicled just how quickly the New York hotel market has rebounded during the last two years in comparison to the rest of the top MSAs and its position as the leading U.S. market is further evidenced by transaction activity within the past year.

In fact, five of the 10 leading hotel transactions in terms of dollar volume throughout the globe in 2011 involve hotels located in the Big Apple, according to Jones Lang LaSalle Hotels (JLLH), which recently closed the sale of the Paramount Hotel in Times Square. The hotel—which was purchased by RFR Holding from Walton Street Capital and Highgate Holdings—came in at number 10 on the list, according to JLLH. While the price was not made public by JLLH, the hotel reportedly sold in the neighborhood of $275 million or $460,000 per room. 

The other four Manhattan hotels on the list were the 897-room New York Palace, which closed in May for an undisclosed price; the 712-room Radisson Lexington, which was sold for $335,000 or $471,000 per key; the 775-room New York Helmsley, which sold for $315.5 million or $407,000 per key; and the 669-room Yotel New York, which sold for $315 million or $471,000 per key.  

Daniel Lesser, president & CEO, New York-based LW Hospitality Advisors, acknowledged that New York hotels that are on the block are fetching more than properties in other major metropolitan markets. “New York hotels on a per-room asset value basis are the highest in the nation,” he said, adding that perhaps somewhat surprisingly on a global basis they are “relatively inexpensive” on a per-room basis when compared with other gateway markets.

Meanwhile, Jeffrey Davis, managing director, Jones Lang LaSalle Hotels, estimated that hotel prices in Manhattan are down merely 15% to 20% from their peak 2007 levels. Davis noted most of the money for the transaction are a result of private equity “as the REITs have been sidelined due to declining stock prices.”  

Lesser further emphasized the importance of New York on the global stage. “In spite of all our nation’s current issues, the U.S. has always been and will continue to be, the safest place to invest on the planet. New York is the capital of the world and the most desirable market in the U.S. to invest in,” he said.

Davis agreed, noting, “The appetite for transaction spans all segments in New York City as this is a top market in the U.S.,” he said.

In addition, despite the city adding to its room supply, Lesser said the market will remain a solid investment. “Even with the several thousand more rooms that will be added during the next several years, fundamentally New York is an ‘underhoteled’ market with relatively high barriers to entry,” he said.