Loews Ends Play for Essex House Hotel in NY
Loews Hotels & Resorts has dropped out of discussions to buy the Jumeirah Essex House Hotel in Manhattan, a trophy property that has drawn interest from a number of luxury brand operators.
Loews was in talks to pay roughly $375 million for the 510 hotel rooms and 10 unsold condominiums. The seller, Dubai Investment, is now turning to back-up bidders, which include a mix of luxury-brand operators and investors. Jones Lang LaSalle Hotels is handling the offering, one of the largest in New York this year.
The hotel, at 160 Central Park South, was offered without brand or management contracts. That drew a number of national and international hotel operators eager to enter the New York market, including Langham Hotels & Resorts of Hong Kong. Marriott International of Bethesda, Md., also circled the offering. It’s unclear if either was working with equity partners.
During the bull market, brand operators, including Marriott, were more likely to sell properties than buy, as many took advantage of high valuations and moved to position themselves as pure operators. “Asset-light seems to have been the way,” one hotel broker noted. But he added that the trophy status of Essex House presented an exception, saying: “This is sort of a once in a life-timer.”
Another factor has been the pullback by REITs. After leading the recovery in hotel sales early last year, most REITs have remained on the sidelines since last summer’s stock-market volatility.
That has presented an opportunity for companies like Loews, which is looking to expand its line of luxury hotels and resorts. The New York company recently closed on the $169 million acquisition of the Renaissance Hollywood Hotel in Los Angeles. That 632-room hotel will undergo a $26 million renovation and be reflagged under the Loews name. Jones Lang and Eastdil Secured advised the seller, CIM Group of Los Angeles.
The Essex House is particularly alluring to international companies like Langham interested in gaining a foothold in New York. Adding to the allure is the strength of Manhattan’s hotel market, which consistently outperforms most of the nation’s other markets in terms of occupancy and revenue per room. But the cost of labor is high due to the Essex House’s unionized status, which turned some bidders away.
Market pros believe that Marriott is interested in converting the Essex House to its upper-upscale brand, JW Marriott, in order to complement its nearby luxury property, the Ritz-Carlton New York.
Dubai Investment, a sovereign wealth fund, bought Essex House in 2005 for $440 million and completed $90 million of renovations, including the conversion of 184 units to condos, most of which were sold as the market for high-end condominiums peaked.