Less than two years after buying the New York Marriott East Side for $270 million, Deka Immobilien and Ashkenazy Acquisition have put the 655-room property on the market. A market watchdog said that the hotel will likely trade for around the same price—if not less—as the hotel market has softened and tourists want to stay at new hotels in trendier neighborhoods.
Colliers International is marketing the 35-story hotel at 525 Lexington Avenue between East 48th and East 49th Streets. It amasses 391,318 gross square feet, according to the marketing materials, and is home to 525LEX Restaurant & Lounge, 16,000 square feet of meeting space and a 1,100-square-foot fitness center. The hotel has “benefited from $56 million ($85,000 per key) of recent capital expenditures,” the brochure indicates.
On May 1, 2015, Morgan Stanley Real Estate’s Prime Property Fund sold the hotel to Deka Immobilien and Ashkenazy for $270 million. It marked the first acquisition of a hotel in the Americas for Germany’s Deka Immobilien, according to a Savills Studley release at the time of the deal. (Savills Studley advised Deka Immobilien in the transaction. JLL represented Morgan Stanley.) The fund had acquired it in 2001 for $287 million.
In addition to the fact that the hotel market is experiencing a softening, “my gut tells me this is a hotel that time has passed by,” said the source, who spoke on the condition of anonymity. “It’s a union labor operation, which has kind of fallen out of favor with investors. That Lexington Avenue corridor was once the place to be if you were going to have a hotel in New York. [I don’t think] it’s nearly as attractive to travelers as it used to be.”
He continued: “It really is not so much that the location has turned into some kind of slum neighborhood; it’s that the other neighborhoods have become much more exciting to travelers.” In addition, he said: “A lot of hotel travelers prefer new conditions.”
Another source who was even more pessimistic said the owners would be “lucky to get the same price they paid. The hotel market is hurting and the hotel union is killing the industry.”
Originally constructed in 1924, the landmarked hotel was designed by the architect of the Empire State Building, Arthur Loomis Harmon. At the time, it was the world’s tallest hotel, according to the Collier’s information.
Collier’s brokers listed as contacts on the marketing brochure either didn’t immediately respond to a request for comment or weren’t available. Ashkenazy’s Ben Ashkenazy was traveling, and no one replied to an email sent to Deka Immobilien.