New York REIT puts Viceroy Hotel on the market

New York REIT is moving to sell its leasehold interest in the Viceroy New York hotel, two years afte

Michael Happel and the Viceroy Hotel

New York REIT is moving to sell its leasehold interest in the Viceroy New York hotel, two years after buying it for $148.5 million, or $618,000 a key.

The company, led by CEO Michael Happel, has tapped Eastdil Secured’s Adam Spies to market the property.

A sale of the Viceroy’s leasehold comes amid reports that competitor SL Green Realty is close to finalizing a deal to buy New York REIT and its portfolio of 23 properties for an undisclosed price. In November, Happel endorsed a sale of the beleaguered firm. It’s not clear how a sale of the Viceroy’s leasehold would impact a deal with SL Green.

The 29-story, 240-key hotel at 120 West 57th Street was constructed in 2013 and totals 128,612 square feet. It was the first ever hotel acquisition made by New York REIT, then known as New York Recovery REIT.

The property can be delivered completely unencumbered by the Viceroy brand, meaning a new investor could hire a third-party manager to operate and rebrand the property, according to an offering memo obtained by The Real Deal.

While demand for well-located commercial properties remains high in Manhattan, the property is hitting the market just as the hotel sector dips in performance amid a flush of new inventory.

The average revenue for an available New York City hotel room fell by 12.9 percent year-over-year in January, according to a recent report, and average occupancy hit just 68 percent, a 4.7 percent annual drop.

But Happel recently said the Viceroy was performing well, despite the soft hotel market.

The boutique hotel’s revenues were up 17 percent in the third quarter of 2015, compared to a 0.7 percent increase for the overall Manhattan hotel market, he said in a November conference call with investors. The property’s net operating income was $1.1 million for the quarter, topping forecasts of $1 million.

“Given continued softness in the Manhattan hotel market, we’re adjusting cash NOI forecast for calendar year 2016 into the $5 million to $7 million range,” he said, “but still expect the hotel to stabilize at over $10 million of cash NOI.”

The Viceroy was originally developed by Ark Partners in 2013.

New York REIT did not immediately respond to a request for comment.

Source: The Real Deal