Posted by on August 23, 2017 4:30 am
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Categories: Anbang Insurance Group Business China donald trump Economy Economy of the United States Fifth Avenue Hong Kong Hospitality Manhattan Midtown Manhattan Morgan Stanley new york city New York Times Northwest Plaza Hotel Real estate Sahara India Pariwar Subrata Roy Trump International Hotel and Tower Waldorf Astoria New York Wall Street Journal Yuan

Here’s some news that might interest the President.

The Indian owners of the Plaza Hotel have hired a broker to tell the New York City landmark, according to the Wall Street Journal. The step is “a sign that a world-wide scramble among investors, celebrities and governments to acquire the property could be nearing an end.”

Perhaps more than any other property (Trump Tower included), the Plaza Hotel is emblematic of Donald Trump’s meteoric rise in the world of New York City real estate. The hotel had for years been an object of fascination for Trump, who reportedly jumped at the opportunity to buy it from Texas billionaire Robert Bass in 1988. According to the New York Times, Trump paid $400 million for the hotel, an unprecedented sum for a hotel at the time.

However, it would also eventually become a symbol of his debt-fueled brush with ruin, as the property was eventually forced into bankruptcy in 1992; in 1995, he bitterly agreed to sell it to a group of Saudi investors.

More than 30 years after Trump was forced to sell it, industry experts believe the hotel could fetch more than $500 million. However, that sum isn’t even close to the highest ever paid for a NYC hotel: Back in 2015, China’s Anbang Insurance Group Co. bought the Waldorf Astoria for $1.95 billion to the highest price ever paid for a U.S. hotel, according to data tracker STR Inc. Now Anbang is being pressured to sell the Waldorf, along with its other foreign assets. Regulators are concerned that a foreign buying spree by Anbang and other Chinese conglomerates has left domestic corporations dangerously overleveraged.

“While it is unclear how much a buyer would pay for a trophy property like the Plaza, hotel investors and brokers suggest it could be one of the most expensive hotel sales on a per-room basis, a popular industry metric. By that method of valuation it could bring in more than $500 million.”

A representative of the company to told WSJ that a buyer has been found, and “a sale is under process and not yet competed.

Per WSJ, the list of potential buyers includes both the Qatari sovereign-wealth fund and Pras Michel, former member of the Fugees.

“Dozens of real estate moguls, foreign government funds and other hotel investors around the globe in recent years have looked into buying the Plaza after Sahara indicated it would listen to offers, according to people familiar with the matter.

A Qatari sovereign-wealth fund, a Shanghai municipal investment fund and Pras Michel, the Grammy-winning co-founder of the hip-hop group Fugees, are among those that have expressed interest, say people who have been close to the process.”

Sahara Chairman Subrata Roy reportedly handled some of the negotiations while serving time in a New Delhi jail.

“Sahara founder and Chairman Subrata Roy, who spent two years in a New Delhi jail on contempt charges, even negotiated with potential buyers from the jail’s guesthouse, according to people familiar with the situation.”

According to WSJ, several interest parties walked away from talks early on because they didn’t think Sahara was serious about selling hotel (i.e. Sahara wouldn’t budge from its asking price, whatever it was). However, the hiring of a broker suggests that this time, they intend to close.

“Sean Hennessey, chief executive officer of the hotel consultants Lodging Advisors told WSJ that hiring a broker suggests that Sahara is, in fact, serious about pursuing a sale of its crown-jewel hotel.

“This suggests a commitment to consummate a transaction,” he said, adding that a professional broker handling the process “might draw people back that looked once and walked away.”

Because of its appearance in classic works of American film and cinema, the hotel has a cultural cache that few can match.

“It has been featured in novels like “The Great Gatsby” and numerous films, including Alfred Hitchcock’s “North by Northwest.” Marilyn Monroe and the Beatles stayed there. John F. Kennedy’s sister Patricia Kennedy held the reception after her wedding to Peter Lawford in the Plaza’s ballroom.

Previous owners of the 110-year old property include hotelier Conrad Hilton and Donald Trump, who once compared it to the Mona Lisa.”

Unfortunately for the Plaza’s owners, they’re selling at a difficult time for the Manhattan real-estate market. As we mentioned above, Chinese authorities are cracking down on foreign real-estate transactions to stanch capital outflows that have helped drain the country’s foreign reserves and put pressure on its currency, the yuan. The effects of these new regulations have already begun to manifest: The average Manhattan hotel sales price in the first half of 2017 was about $515,000, down 26% from the recent peak in the first half 2015, according to data company Real Capital Analytics.

According to a team of analysts at Morgan Stanley, the Manhattan real estate market is headed for a valley as purchases of foreign-real estate by Chinese companies are expected to decline by 84% in 2017, and another 18% in 2018. The influx of Chinese buyers in the aftermath of the financial crisis helped drive bull markets in hot urban markets like New York City, London and Hong Kong.

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