Former New York Marriott East Side Sells at Massive Loss for $153.4M
By Mark Hallum February 7, 2023 12:41 pmreprints
After years of litigation between the owner and lender, the long-shuttered New York Marriott East Side hotel has finally sold for $153.4 million — a loss of nearly $117 million from its previous sale price.
The 655-room hotel at 525 Lexington Avenue — purchased for $270 million by Ashkenazy Acquisition Corporation and German bank Deka Immobilien Investment GmbH in 2015 — sold to Beverly Hills, Calif.-based Hawkins Way Capital and Värde Partners after Ashkenazy and Deka were in default of their loans on the property as recently as July 2021.
DekaBank, Deka Immobilien’s parent company, was listed as the only seller, having foreclosed on the property in February 2021. Madison Realty Capital provided about $191.5 million in financing for Hawkins and Värde, according to a source with knowledge of the deal.
Hawkins Way, Värde and Deka did not respond to requests for comment. It’s unclear who brokered the sale.
Ashkenazy sold its 15 percent minority interest in the hotel to Deka at a $265 million valuation about a year ago, according to an Ashkenazy spokesperson.
The hotel opened in 1924 but closed in March 2020 and hasn’t reopened since.
The investment by Ashkenazy and Deka was cursed almost from the start.
In late 2016, less than two years after buying it, the partners listed the hotel on the market for the same amount they acquired it for, but the older building between East 48th and East 49th streets had a difficult time competing against newer hotels that were attracting tourists, Commercial Observer reported at the time.
The property had been declining in value before the acquisition by Ashkenazy and Deka, however. Morgan Stanley Real Estate’s Prime Property Fund had sold the hotel to the joint venture at a $17 million loss in 2015, having picked it up for $287 million in 2001.
In 2019, Deka took Ashkenazy to court claiming it had backed out of a deal to buy the property for $174 million due to an inability to obtain acquisition financing. Deka had an 85 percent stake in the property, while Ashkenazy controlled the remaining 15 percent.
When that failed, Ashkenazy and Deka set their differences aside to sue Marriott, which they alleged had misappropriated $12 million in revenue after it became apparent the hotel would not be welcoming guests again anytime soon, The Real Deal reported in October 2020.
The final blow came in February 2021 when DekaBank foreclosed on the property after the joint venture failed to pay the $53 million mortgage.
Mark Hallum can be reached at firstname.lastname@example.org.
Update: This story has been updated to show that the loan amount was $191.5 million. A previous version stated that it was around $166 million.