Chartres, Apollo Global JV Buys Times Square Novotel in $212M Deal
Under a sale and management-back agreement, a subsidiary of Accor Business and Leisure Management L.L.C. has sold the 480-room Times Square Novotel in New York to a joint venture of Chartres Lodging Group L.L.C. and Apollo Global Real Estate Management L.P., the parties announced Friday. Apollo is the real estate management group of Apollo Global Management L.L.C.
The deal is worth $212 million, or $443,500 per room, of which the actual selling price is $94 million. In addition, the buyer has committed to completing a full renovation (its scope defined by Accor) over the next 18 months, at an estimated cost of $118 million.
In addition, an earn-out totaling up to $16 million could be cashed in depending on the hotel’s results after the refurbishment. The hotel will remain open while the work is being done and will continue to be operated by Accor under a long-term management agreement. Jones Lang LaSalle Hotels arranged the sale on behalf of the seller; JLL’s team was led by managing director Jeffrey Davis and senior vice president Gilda Perez-Alvarado.
The deal is unusual in that the money earmarked for renovation exceeds that for the purchase itself.
Chartres Lodging president and co-founder Maki Nakamura Bara told Commercial Property Executive that “Novotel is generally considered an upscale brand, but after the renovation, the Novotel Hotel New York will likely compete more in the upper upscale segment,” he said. “The hotel will remain a Novotel-branded property after the renovation and will be the flagship for the brand in the U.S.”
An industry source who’s familiar with the hotel market in the Times Square area and who wished to remain unnamed told CPE that “the quality has gone up” there in recent years, with the other hotels either newly built or recently renovated. The renovation of the Novotel, built in 1984, the source said, will bring it up to a level where it can compete with the world-class hotels nearby.
The renovation will include installation of a 4-pipe HVAC system and full renovations of guestrooms, the public areas and the Terrace Bar overlooking Times Square. The repositioning will also add Sky Boxes (“innovative meeting rooms” overlooking Broadway), two suites and a new fitness center.
Accor is the world’s leading hotel operator, with more than 4,400 hotels and 530,000 rooms in 90 countries.
*This story was updated at 7:20 a.m. EST on Feb. 14, 2012, to clarify the relationship between Apollo Global Real Estate Management L.P. and Apollo Global Management, L.L.C.