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March 28, 2018  

Host Puts Westin Hotel on the Block in NY

Host Hotels & Resorts is teeing up another Manhattan hotel, looking to further reduce its footprint in a market weighed down by new supply.

The 774-room Westin New York Grand Central could attract offers in the vicinity of $325,000/room, or just over $250 million. JLL has the listing.

Host, a REIT in Bethesda, Md., is paring properties in markets with low or declining revenue growth, as well as hotels that are underperforming or in need of substantial renovation.

The Westin fits that bill. Its net income dropped almost 2% last year, making it one of only four properties to post a decrease among Host’s top 40 U.S. hotels in revenue per room. And its $12.2 million of earnings before interest, taxes, depreciation and amortization was far behind the level at the REIT’s top performers.

But the upper-upscale hotel also recorded some more-favorable metrics. It was 87.4% occupied at an average rate of $285.97/room last year. That generated $250.02 of revenue per room — ranking the Westin among the REIT’s top 10 hotels in that category. It also outperformed the average per-room revenue of $238.33 for its peers in the Midtown East submarket, according to STR.

The Westin is at 212 East 42nd Street, between Second and Third Avenues, one block east of Grand Central Terminal. Host acquired the hotel — then called the New York Helmsley — in 2011 from the Estate of Leona Helmsley for $313.5 million, or $406,000/room. The REIT then closed the property for 18 months to conduct $75 million of renovations and re-opened it in 2012 under the Westin flag.

The Westin was one of several Manhattan hotels that underwent sweeping renovations, only to re-open as new properties were coming on line. “None of these renovations have lived up to expectations,” said one market pro. “It’s a tough market . . . no one has done well in New York.”

That, in part, is what is driving REITs to sell. Host has a pending deal to sell another Midtown Manhattan hotel — the 697-room W Hotel New York, at 541 Lexington Avenue — for $190 million, or $273,000/room, to a joint venture between Capstone Equities of New York and Highgate Holdings of Dallas. “This hotel has been a particularly poor performer and requires substantial [capital expenditures],” Host chief executive James Risoleo said on a Feb. 11 earnings call with analysts.

Eastdil Secured is brokering that sale, which is scheduled to close in the second quarter.

Investors with high-yield strategies and faith in New York’s resilience have been quick to pounce. They see hopeful signs, given that the market’s average occupancy rate remains among the highest in the country and that development is starting to taper off.

Meanwhile, Host is recycling sales proceeds into markets with better prospects for revenue growth. The company has agreed to buy three high-end hotels from Hyatt Hotels of Chicago for $1 billion: the 668-room Grand Hyatt San Francisco; the 454-room Hyatt Regency Coconut Point in Bonita Springs, Fla., and the 301-room Andaz Maui at Wailea Resort in Hawaii. Eastdil and JLL jointly marketed the three properties.