(RealShare New York comes to the Grand Hyatt, New York, NY, October 9.)
NEW YORK CITY-The Jumeirah Essex House, the iconic 81-year-old hotel overlooking Central Park, has officially changed hands. Chicago-based REIT Strategic Hotels & Resorts has closed on its acquisition of the landmark building from Dubai Investment Group for $362.3 million after signing an agreement to buy the hotel and re-brand it as a JW Marriott in late August, the company unveiled on Sept. 14. The transaction equates to a purchase price of approximately $685,000 per unit based on 518 units, including 509 guest rooms and nine condominiums.
After securing $190 million in first mortgage financing from Bank of America to help fund the purchase last month, the REIT evaluated joint venture options and other alternatives as capital sources for the remaining balance of the acquisition. As a result, Strategic established a joint venture agreement with an affiliate KSL Capital Partners to fund the equity portion of the deal, in which the company will own a 51% stake and will serve as the managing member and asset manager.
As of this week, Marriott International will begin operating the hotel on Sept. 18, making it the second time Essex House has flown the Marriott flag in the property’s history. Known for its distinctive red sign over Central Park South, the hotel was constructed in 1929 by renowned architect Frank Grad. On January 16, 2006, Dubai Investment Group—who purchased the property for $440 million under its Jumeriah Group title—took over the hotel from Nikko Hotels, who owned and managed the building since 1985. Before that, Marriott purchased the hotel in 1969.
Beginning immediately, Strategic plans to invest approximately $18.3 million in property improvements, including renovations to common areas, system upgrades and new signage and branding efforts. In turn, the company forecasts that its pro rata share of earnings from the property, including net operating income guarantee payments from Marriott International, will contribute approximately $3.5 million of EBITDA for the remainder of 2012.
Laurence Geller, president and CEO of Strategic Hotels & Resorts, Inc., comments: "We are proud to once again be involved with this marquee asset, especially given its attractive deal terms, unique and enviable Central Park South location and tremendous upside potential. Consistent with our strategy of being an opportunistic investor, we moved quickly to take advantage of this highly-compelling opportunity. We are thrilled to have both another irreplaceable asset with Marriott International and to launch a new partnership with KSL Capital Partners, LLC, one of the industry's most admired investors."
Arthur Adler, managing director and CEO of Jones Lang LaSalle Hotels, Americas; managing director Jeffrey Davis and SVP Gilda Perez-Alvarado led the Jones Lang LaSalle Hotels team on this transaction on behalf of Dubai Investment Group. Mathew Comfort, EVP of the firm’s Real Estate Investment Banking group, led the team on the acquisition financing.
Mark Edelstein, Jeffrey Temple, Keith Print and James Pincow of Morrison & Foerster provided legal counsel to the seller. SNR Denton was counsel to KSL Capital Partners.
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