Without a doubt, the Manhattan hotel segment of the market has surged this year. Since hotels are not subject to long term leases and adjust their income daily, their pricing and demand can shift quickly.
Last year, only 13 hotels sold, whereas 14 have already traded in the 1st half of this year. More impressively, these recent sales added up to $2.4B, which is 73% more than 2010's total. (This was also more than 10 times 2009's total from only two sales, but few people take any stock when comparing to this year!)
The average 1H11 price per key was $429,089, which was also up 12% from last year. The largest hotel sale this year was the Park Central at 870 Seventh Avenue at West 55th Street for $405,500,000, which equated to $434,154 per key. Bethesda, Md.-based real estate investment trust LaSalle Hotel Properties purchased the property.
According to the Real, The 934-room hotel, built in 1928, was owned by Highgate Holdings. They will continue to operate and manage the hotel. The property is slated to undergo a $30 million to $35 million renovation next year, including upgrades to guest rooms, bathrooms, corridors and lobby. La Salle currently owns two Manhattan hotels -- Gild Hall at 15 Gold Street and Hotel Roger Williams at 131 Madison Avenue -- and more than 35 throughout the U.S.
Meanwhile, the On The Avenue Hotel at 2170 Broadway and West 77th Street recently sold for $715,609 per key or $191,067,648. This was an impressive sale on a per key basis, but was still less than The Carlton House at 680 Madison which sold at over $1,000,000 per key as a residential conversion.
We are still receiving numerous requests for existing or hotel development sites. This demand is fueled by the record 48.8 million visitors who came to NYC last year. According to nyc.gov, in 2000, we only had 36.2 million visitors. Several lenders are now considering giving hotelloans which has also helped.
The challenge now is to find more sites and hotels for sale. Although it was a busy first half, few hotels are on currently on the market. A few that are are only partially built. There is a dearth of good hotel development sites. Supply and demand will continue to be the driving factor in this asset class.