BH Properties Scores $338M Manhattan Hotel Deal

The Los Angeles-based company has acquired a portfolio of leased fee positions under three New York City hotels from Lexington Realty Trust.
Element New York Times Square West (image via Google Maps)

Element New York Times Square West (image via Google Maps)

New YorkBH Properties of Los Angeles has acquired a portfolio of leased fee positions under three New York City hotels from Lexington Realty Trust for $338.2 million, BH Properties announced last Friday.

Structured as a reverse 1031 exchange, the acquisition was BH Properties’ first in Manhattan and the largest transaction the company has completed. BH Properties had to restructure its balance sheet to be able to acquire the assets and reportedly plans to dispose of up to 25 properties throughout the country in the next six months.

Ascott Residence Trust, a REIT listed on the Singapore Stock Exchange, owns The Element New York Times Square West at 311 W. 39th St. and the Sheraton Tribeca at 370 Canal St. The Element has 411 guest rooms across 40 stories, and the Sheraton is a 21-story building with 369 rooms. The company is managed by Ascott Residence Trust Management Ltd., an indirect wholly owned subsidiary of CapitaLand Ltd., one of Asia’s largest real estate companies.

Magna Hospitality, of Warwick, R.I., owns the 43-story, 399-key Doubletree Hotel at 8 Stone St. and currently manages all three assets. Magna was the developer of all three hotels, all of which opened in 2011, and brought in Lexington Realty Trust in 2013 as the original ground lessor. About the same time and as part of its recapitalization of the project, Magna sold The Element and Sheraton Tribeca to Ascott Residence Trust.

Eastdil Secured LLC was the only broker involved in the transaction.

For its part, Lexington Realty Trust reported that the sale price represented a GAAP capitalization rate of 13.6 percent and a cash capitalization rate of 4.6 percent, and that about $213.1 million of mortgage debt was assumed by BH Properties.

“The disposition of our remaining New York City land investments turned out to be a great success,” T. Wilson Eglin, Lexington CEO & president, said in a prepared statement. “[T]he sale came in at better than expected pricing. Furthermore, the sale has reduced our leverage considerably and produced cash to retire the outstanding balance on our revolving credit facility and fund other growth opportunities.”

“Buying the leased fee positions in New York provides us with an opportunity to dispose of some properties that are outside of our target market or are no longer a focus for our investment strategy,” BH Properties President Steve Gozini said in the company’s announcement.