To purchase a development site (often times an empty lot), the cost per buildable square foot (how much you are permitted to build on that site) averaged in $681.00 in 2016 (TRD 7/17). Most of that amount would be for the air above the soil....only in New York!
The Hotel Business
Between COVID prices and recent laws that will make the construction of new hotels virtually impossible, now is probably a good time to purchase a hotel. In August of 2023 the best - location Park Lane Hotel sold for $623 million, or nearly $1 million per room, which is very high, but as there are fewer 5 star hotels than there were 5 + years ago, the new owners should be able to get top rates per room (CO 9/5/23). Another recent high priced sale was for the 97 room Sixty Soho, which sold for 1.1 million per key (CO 3/21/23). The Renaissance Hotel at 2 Times Square sold in October of 2023 for $165 M, or $520,504 per room (CO 10/17/23) which also seems high. The 655 room Former Marriott East Side at 525 Lexington Avenue, which is a beautiful pre-war tower, sold in February, 2023 for $153.4 million, or $234,198 per room. This was a loss $117 million form a previous sale. The 200 room Muse Hotel sold in September of 2022 for $49.5 million, or $247,500 per room (CO 10/18/22). The 226 room Holiday Inn at 125 West 26th Street sold in June of 2022 for $83 million, or $367,000 a key (NYP 7/1/22). The 4 star Doubletree at 569 Lexington Avenue sold for $146 million, or $191,000 per room. The owners took a $186 million loss from what they had paid. (RD 1/7/22). A very overpriced sale in January of 2023 was for the Mr. C Seaport, which sold for $60 million, or just under $1 million per key for the 66 room downtown hotel (CO 1/24/23). A Spring 2021 COVID sale of the 600 Watson Hotel in Hell’s kitchen was for $175 million, or $291,666.00 a key, or room. (CO 4/13/21). This probably was a good value. In July, 2021, the COVID sale of the historic Lexington Hotel was for $185 million, or $255,000.00 per key. The hotel had been closed, and had been recently refurbished. 2021 New York City per hotel room average revenue has been just $95.00 (CO 7/27/21). The highest sale price of late for a Manhattan hotel was for the famed Saint Regis, which sold in late 2019 to the Qatari Fund for $310 million, or an astounding $1.351 million per room. This was a way overpriced transaction, as was the 270 room W Hotel / Union square sale, which also closed in the fall of 2019 for $206 million, which is an astounding $762,962 per room. The price of hotel rooms, though in general, has declined by 30 - 50 % in the past two years, and so finally the price to purchase hotels has come down as a result, which was needed. The Viceroy on West 57th Street sold in 2018 for $41 million, having traded for 148.5 million in 2013, making the current price per room a reasonable $170,000 (NYP, 1-/15/18).
The prices of constructing a five-star hotel are almost one and a half times more than a similar sized office building, with the costs ranging between $677 and $871 per square foot (Pro Est 6/1/21).
New York City had 58.3 million visitors in 2017 but only has 115,369 hotel rooms....with average room rates being $273.00 (RD 2017 DB). A recent hotel development site at 145 West 47th Street sold for $713 a buildable square foot (4/17). A recent and smart hotel deal would be Sam Chang's 140 West 28th Street, which went for $230,000 a key (CO 1/10/18). Hotel properties, which recently were selling at record prices ($2.04 million per key at the Baccarat, $1.4 million per key for the Mandarin Oriental hotel in the Time Warner Center ), should keep going down in price. The average price per key in 2016 was a crazy $500,9078. In December of 2016, the 618 room Stewart Hotel sold for $351,132 a room (CO 1/4/17). The Elysee, a four star property on East 54th Street off of Park Avenue, traded for $55 million, or $550,000 per room, in the winter of 2016 (REW 2/10/16). The most recent big sale was the Waldorf, in October of 2014, which traded for $1.9 billion, or $1.4 million per room...with every one of them needing major renovation.
No owner is going to make any money from most of these deals in the months and years to come. The Hilton Garden Inn in Chelsea traded in the summer of 2016 for $405,000 per room (REW 7/20/16). The 2015 sale of the Palace Hotel was for $885,588. per room...and the 563 key London Hotel sold for $382 million shortly thereafter, or $678,000 per room. In October 2012, the sale of the 665 room Manhattan Hotel (formerly the Sheraton Manhattan), was for $275 million, or $413,533 a room. In August of 2012, the Essex House on Central Park South sold for $375 million, or $736,738 a key--in 2005 the same property had sold for $423 million, which means that a $48 million loss was taken. The 775 room Helmsley Hotel on 42nd Street sold in April of 2011 for $570 million, or $735,483 a key. The more modest Holiday Inn Express at 15 West 45th Street also sold in March of 2011, for $354,000 a key. The Royalton and Morgan Hotels traded for $496,453 a key.
In October 2012, the Setai Fifth Avenue was sold for $229 million, or $1.070 million per room--again, way too much. Finally, the Milford Plaza was reported in April 2013 to have sold for $325 million, or $250,000 per room, which is a hotel sale that should actually make some money for its new buyers. At the close of 2013, The Park Lane, which is arguably in the best hotel location in the city, sold for $660 million, or $1.090 per key (income was said to be $20 million a year there for the Helmsleys....so not a great return, but a better price than the over one billion dollars that the estate had wanted several years ago. The 300 room Standard, which traded in February , 2014 for $400 million, or $1.333 million per room...