The Indian owners of the Plaza Hotel have hired a broker to sell the New York City landmark, a move expected to unleash a scramble among foreign investors
eager to own a jewel of U.S. real estate.
Chinese insurers, Middle Eastern governments, Latin American tycoons and other overseas investors have ramped up their purchases of U.S. real estate in recent years, often with a distinct preference for prestige properties in major cities.
made nearly $61 billion in U.S. property acquisitions for the four quarters ended March 31, more than double the amount invested during the same period five years earlier, according to Real Capital Analytics.
These buyers frequently view U.S. property as a reliable long-term investment
that will appreciate and generate steady income for decades. This is especially true for hotels, which are considered a good inflation hedge because room rates can be readily raised.
Luxury hotels, some say, also confer prestige on their owners. In 2015, China’s Anbang Insurance Group Co. paid $1.95 billion for the Waldorf Astoria New York, the highest price ever for a U.S. hotel. Anbang’s chairman later told a Harvard University audience about a plan to convert many rooms to condos. Buyers, he boasted, would need “more than money to qualify” for residence. Luxury hotels “attract foreign buyers for ego reasons,” said Ryan Meliker, a hotel analyst for the investment
bank MLV & Co. “And everybody knows the Plaza.”
The 1907 property has a pedigree 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 her wedding reception in the Plaza’s ballroom. Previous owners include hotelier Conrad Hilton and Donald Trump, who once compared it to the Mona Lisa. The hotel has passed through numerous hands over the years, including owners from Singapore, Israel
and Saudi Arabia.
Sahara Group, a Lucknow, India-based conglomerate and the hotel’s current majority owner, has enlisted JLL Hotels and Hospitality Group, a unit of real-estate firm JLL, to find a buyer, according to a person familiar with the matter. While it is unclear how much an investor would pay to own 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 for hotel deals. By that valuation, it would bring a sales price of more than $500 million. A Sahara spokesman wouldn’t comment on the hiring of a broker but said a “sale is under process and it has not yet concluded.” Dozens of real estate moguls, foreign government funds and other 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 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.
None of those talks led to a sale, and several of the Plaza’s suitors walked away frustrated, even questioning whether Sahara was a serious seller, according to hotel brokers and investors involved with the discussions. But recruiting a broker to run a formal sales process signals that Sahara is getting more serious about unloading its crown jewel, said Sean Hennessey, chief executive officer of hotel consultants Lodging Advisors, which isn’t involved in the sale process.
“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.”
Source: Wall Street Journal