NEW YORK CITY-The Carlton Group has announced that its chairman, Howard Michaels, has organized an equity partnership between hotelier Ian Schrager, a real estate developer and brokerage firm to form a joint venture to buy an equity stake in 156-162 Leroy St., along with the adjacent corner parcel, 357-363 West St. The asset is owned by AREA Property Partners, which last month announced it would be acquired by Los Angeles-based Ares Management.
Schrager's partners on the deal are Howard Lorber, chairman of residential brokerage company Douglas Elliman and head of the Vector Group; and Steven Witkoff, a developer and head of the Witkoff Group, which owns 20 buildings—including the famed Woolworth Building in Lower Manhattan. Schrager is best known as the co-owner and co-founder of Studio 54. He went on to create buzz-worthy boutique hotels.
Carlton also arranged senior debt financing for the project from a non-New York balance sheet lender, which Carlton says in the press release is, “particularly artful given that the property is land and still has to receive a residential zoning variance.” Michaels, who specializes in putting together equity partnerships and highly leveraged multi-tranched debt solutions, put the same trio of buyers together last year when the group acquired a major development site (with Ziel Feldman) on Chrystie Street to build a new Schrager branded condominium and hotel. Michaels also has put together one other large Manhattan hospitality transaction with Schrager, Witkoff and Lorber, which is slated to be announced soon.
On Leroy Street, Schrager plans to build a large residential tower with AREA. The parcel has as-of-right zoning that could accommodate an approximately 89,000-square-foot hotel, but sources say the group plans to seek a variance for a residential tower of 100,000 square feet or more, the announcement states.
The new group recapitalized the Leroy Street property, which one source says now has a value of about $50 million or approximately $600 per square foot. Michaels also arranged 90% financing for the 215 Chrystie St. land and to-be-built condo and hotel transaction back in December when he initially put together the investment partnership of Schrager, Witkoff and Lorber.
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
