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Petrol Dollars Buy Union Square’s Trendy W Hotel October 13, 2006

Posted by farshadf in NYC, Uncategorized.

A Dubai-based company, in its fifth local real estate acquisition within the past 12 months, has scooped up the W Hotel in Union Square for $285 million, or more than $1 million for each guest room.

The 270-room hotel on Park Avenue South was purchased by Istithmar, an investment firm that has spent more than $3 billion acquiring city real estate since November 2005.

Istithmar, which is run by Dubai’s ruling family, paid a per-room rate that exceeds prices fetched for landmark hotels like the Plaza and the Essex House.

“It’s indicative of what’s going on in the hotel market — that a hotel can generate enough revenue that it makes sense to pay $1 million a key,” a managing director of real estate investment banking firm the Carlton Group, John Bralower, said. “Moreover it makes sense to develop hotels at $600,000 or $700,000 a key. When things are trading at large numbers, that’s when people decide it makes sense to build.”

Crain’s New York Business reported that Istithmar has no plans of changing the name or otherwise rebranding its latest acquisition. Calls to the company’s Dubai offices were not immediately returned.

Despite its high-priced New York spending spree, Istithmar has proved “pretty selective” in the properties it has acquired, Mr. Bralower said.

Earlier this year, the firm paid $300 million for the Beaux-Arts Knickerbocker Hotel building in Times Square, $1.2 billion for 280 Park Ave. and $600 million for 450 Lexington Ave., all of which are commercial high-rises in Midtown. The company put down $705 million for Helmsley Hotel at 230 Park Ave. in November 2005.

A director of market analysis for Real Capital Analytics, Dan Fasulo, said he wouldn’t be surprised if Istithmar were among the final bidders for the Stuyvesant Town and Peter Cooper Village apartment complexes, which MetLife put on the market for a target price of $5 billion. “They’re one of the few players in the world who could write that check in cash,” he said.

The United Arab Emirates-based investment firm appears to be looking for “scale” in its New York acquisitions, according to Mr. Fasulo. “They’re buying up anything they can,” he said. “It’s petrol dollars, and with the run up in oil over the last couple of years, there’s a lot of money to invest, and one of the places they’ve targeted to invest is Manhattan real estate.”

A broker with CB Richard Ellis, Woody Heller, said Istithmar’s New York real estate investments were, generally, “high-profile, high-end and fancy buildings.”

Istithmar’s American investment portfolio also includes Loehmann’s discount department store, which it purchased for $300 million in May, and Perella Weinberg Partners, acquired for $100 million in March.

The W Hotel in Union Square is housed in a 20-story, 200,000-square-foot building, at 201 Park Avenue South, near East 17th Street.

This 1911 landmark Renaissance Revival tower last changed hands in December 1999, when Guardian Life Insurance Company (formerly Germania Life Insurance) sold its headquarters to Related Companies and Starwood Hotels & Resorts Worldwide — the W Hotel chain’s parent company — for a reported $45 million. After a $100 million renovation, the property reopened as a W Hotel in October 2000.

“It’s not GE Building or the Empire State Building or 730 Fifth Avenue, but it is a well-known hotel on a well-known corner of Union Square,” the chief executive officer of Massey Knakal, John Ciraulo, said. “For this area, it’s very much a trophy property.”





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