07/06/2011

Apollo Making Play for Times Square Hotel

A partnership led by Apollo Global Real Estate is circling the Novotel New York Times Square Hotel.

New York-based Apollo and its partner, Chartres Lodging of San Francisco, appear to be valuing the 480-room hotel at $111 million, or $231,000/unit. It’s unclear whether they have made a formal offer.

But Apollo faces a potential obstacle: Madison Capital has a right of first refusal to buy the hotel, which is at Broadway and West 52nd Street. The New York firm has hired Ackman-Ziff Real Estate to help drum up an equity partner to pursue a purchase.

A buyer would have to undertake a substantial renovation, including upgrades to the mechanical systems, rooms and common areas. By some estimates, the all-in cost of buying and renovating the property could amount to roughly $400,000/room, or $192 million.

The seller, French hotel company Accor, plans to continue operating the property under a long-term management contract. It is being advised by Jones Lang LaSalle Hotels.

The hotel was built on top of a four-story office and retail building formerly owned by a development firm, Brody-Lewis Co. In the early 1980s, Brody-Lewis sold the development rights above the building to Accor, which constructed the hotel. Brody-Lewis retained a long-term leasehold interest in the original space and was given the right of first refusal on the hotel. In 2006, it sold the leasehold interest in the original building and the right of first refusal to Madison.

Madison has leased the approximately 100,000 square feet of retail and office space on the lower four floors. The retail tenants include McDonald’s, Duane Reade and New York Sports Club. The hotel has a separate entrance, at 226 West 52nd Street.

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