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New York's Plaza Hotel Sale, the Second-Priciest Manhattan Hotel Deal of 2018, Reflects Stronger Fundamentals

At Almost $2.2 Million Per Room, Price Indicates More Demand for the Biggest Hotels
July 9, 2018
The sale of New York's Plaza Hotel reflects improving fundamentals for the largest U.S. hotels.

The sale of New York's Plaza Hotel -- the iconic landmark whose backers have run the gamut from Conrad Hilton to President Donald Trump -- for a reported $600 million makes it the second-most expensive Manhattan real estate deal involving a hotel this year, indicating the fundamentals are improving for large hotel sales into 2019.

Commercial real estate services firm Jones Lang LaSalle told CoStar News it brokered the Plaza sale, in which Qatar-owned investment fund Katara Hospitality bought all stakes held in the property late last week. Those stakes consisted of 75 percent held by Sahara India Paramar and a 25 percent combined stake held by Saudi Prince Al-Waleed Bin Talal of Kingdom Holding Co. and New York City-based developer Ashkenazy Acquisition Corp., according to reports.

The reported $600 million price makes the sale of the Plaza, at 768 Fifth Ave. across the street from Central Park, the most expensive Manhattan hotel-related sale of 2018 after the deal for 20 Times Square, according to CoStar data. The 20 Times Square property sold for $1.53 billion in April to a joint venture of real estate services provider Maefield Development and New York-based asset management firm Fortress Investment Group.

The Plaza Hotel sale is significant because high-value deals have become rarer than a few years ago, according to Jeff Myers and Robin Trantham at CoStar Portfolio Strategies.

Nationally, there have been 36 hotel sales for more than $100 million so far this year, on pace to exceed the rate of about 60 such sales each in 2016 and 2017. In 2015, 80 hotels traded at more than $100 million across the country.

Fundamentals for New York area hotels remain strong, fed by record tourist volume. There are now more than 17 hotels with more than 200 rooms under construction in the New York metropolitan area, accounting for more than 16 percent of the national supply of hotels this size.

The 20 Times Square project is far larger in scope than the Plaza Hotel, though they both fit into the category of more than 200 rooms. For the Plaza Hotel, a 282-key, 727,639-square-foot property sold at a $600 million transaction price equates to almost $2.2 million per room, or $824.58 per square foot, according to CoStar data. In comparison, 20 Times Square went for almost $3.4 million per room, or $4,371 per square foot. The Times Square hotel is 350,000 square feet with 452 rooms.

The Plaza’s 282 units are a mix of 100 condominiums, 52 residences and 130 guestrooms. A portion of the hotel’s rooms were converted in 2006 by Elad, an Israeli real estate investment firm and the Plaza’s former owners. Elad sold its controlling stake to Sahara in 2012 for $575 million, according to CoStar Sale Comp.

The Plaza Hotel's fame has outshined its size. Writer Truman Capote partied there, former Beatle John Lennon dined there and actress and singer Liza Minnelli frequently performed. Hotel magnate Hilton and Trump were owners, albeit 45 years apart. And for six years, architect Frank Lloyd Wright called Suite 223-225 his home.

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