Fortress Provides $260M Refi for Sheraton Times Square

MCR Hotels and Island Capital have secured a $260M refi for the Sheraton Times Square, allowing the 1,780-key hotel on Seventh Avenue to exit forbearance.

Fortress Investment Group provided the $260M floating-rate loan, which matures in four years and refinances a $250M loan backed by the Sheraton Times Square.

JLL arranged the new financing after a forbearance agreement, originally set to expire on November 8, was extended.

Kevin Davis, Americas CEO of JLL’s Hotels and Hospitality Group, said in a statement that the refinancing of the Sheraton was “indicative of improved debt capital markets sentiment in New York, which we expect will persist as the hotel market continues to benefit from the recovery of group, business transient and foreign travel demand.”

“The [Sheraton Times Square's] performance has rebounded since we acquired the hotel, which we believe is a testament to the strength of New York City’s lodging market,” Tyler Morse, MCR CEO, said in a statement.

MCR and Island Capital bought the Sheraton, located at 811 Seventh Avenue, in April 2022 for $373M from Host Hotels & Resorts, which provided the $250M loan that financed the deal. The loan expired on October 18.

The 2022 transaction was barely half of what the Sheraton fetched in 2006, when it was sold for $738M. The 50-story hotel, which opened in 1962, includes nearly 62K SF of meeting space and a 23K SF ballroom.

As banks have pulled back on their commercial real estate lending this year, alternative lenders like Fortress have stepped into the breach.

In August, Fortress made a bold move in NYC’s beleaguered office market with the purchase of $1B in loans from Capital One. The lion’s share of the debt portfolio acquired by Fortress from Capital One was believed to involve NYC office loans.

In a Q2 2023 earnings report, Capital One disclosed that it had reclassified $888M in office loans from loans held for investment to loans held for sale.

As of June 30, 2023, New York-based Fortress had nearly $45B of assets under management on behalf of more than 1,900 institutional clients and private investors.

According to company’s website, Fortress is pursuing an “opportunistic” credit strategy involving investments in distressed and undervalued credits, including “time sensitive or event driven investments where we believe risk is fundamentally mispriced.”