Sam Chang Scores $83M MRC Mortgage at Rebranded Midtown Hotel
Sam Chang‘s hotel firm has pinned down a $83 million from Madison Realty Capital (MRC) to refinance a hotel it owns near Rockefeller Center, according to public records and executives involved in the deal.
The debt refreshes the capital stack at the McSam Hotels property at 25 West 51st Street, between Fifth Avenue and Avenue of the Americas. The debt partially replaces a $100.5 million loan from Aareal Capital in 2016: Take the lower dollar figure as a clue that changes are afoot at the property.
MRC’s founder, Josh Zegen, is a frequent lender on Chang’s hotel projects and said that the refinancing coincides with a new equity injection into the property and a deal that sees Chang buying out the hotel’s branding partner, Club Quarters. The property is still open for business, but it’s no longer connected with the CQ flag.
The loan is split into a $64.4 million substitute mortgage and a $14.6 million gap mortgage — New York City Department of Finance records show — a sign that a longer-term deal could materialize once Chang’s changes at the property culminate in a new, more stabilized business plan.
“The hotel is fully operational, and hasn’t missed a beat” during the transition, Zegen said. He pointed out that the Midtown hotel market could get a boost from an even bigger transition looming on the horizon: “As you know the Hyatt at Grand Central is getting demo’d, with its 1,400 rooms. That will help all of Midtown[‘s hotel market], generally.”
The Club Quarters website no longer offers rooms at the Chang-owned property, but lists another active location down the block at 11 West 51st Street, a hotel known as The Jewel — a neighboring hotel that Club Quarters owns outright, as per Zegen. A receptionist at that property confirmed that the former location at 25 West 51st Street is no longer part of the Club Quarters brand.
Meanwhile, Chang — whom the Wall Street Journal described as “New York’s Budget Hotel King”— is at a turning point. He has been in retreat from the property market of late, completing significant sales of his hotels both before and after his May announcement, first covered in the Wall Street Journal, that he would retire. In February, PincusCo reported that change had come to terms with Magna Hospitality Group to sell a hotel in the Garment District. And just last week, Chang agreed to offload a Times Square lodging, at 40 West 45th Street, to Masterworks Development Corporation for $64 million, as per The Real Deal.
Chang, reached by phone, said that he couldn’t speak about the deal right away because he was in the midst of traveling.