Watermark Capital moves to sell Chelsea Holiday Inn

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Michael Medzigian, President and Managing Partner, Watermark Capital Partners (Watermark Capital Partners, iStock, Illustration by Kevin Cifuentes for The Real Deal)

A national hotel investor chooses to cut its losses on a Holiday Inn in Chelsea rather than wait for the city’s hotel sector to recover.

Watermark Capital is considering selling the 226-key hotel at 125 West 26th Street between Sixth and Seventh Avenues, Crains reported. The investment firm has owned the building since 2013, when it bought it from Magna Hospitality for $113 million.

The hotel managed to stay open for most of the pandemic, but struggled to make up for lost revenue. After posting an average occupancy rate of 92% in 2019, it was only 54% occupied in the fall and its cash flow had turned negative, according to Crains.

Watermark fell behind on its mortgage payments in October 2020 and the loan was transferred to a special agent in January last year, according to the publication. At the time, the property was valued at $78.4 million, slightly more than his $72 million loan.

So far, the company has avoided foreclosure by negotiating with its lender. We do not know how much he asks in exchange for the property; the buyer will probably have to assume the balance of the loan from Watermark.

Despite the uncertainty over the future of the city’s hotel sector, there appears to be a market for its struggling hotels.

Last month, John Young’s Emmut Properties bought the shuttered Excelsior Hotel on the Upper West Side for $80 million. Emmut has not revealed its plans for the property, but the company specializes in converting buildings into rental complexes.

That same month, Apple Core Holdings sold the shuttered New York hotel in Murray Hill for an undisclosed price to Prem Jyotish. The building is to be converted into transitional housing for the homeless in partnership with the Bowery Residents’ Committee.

Under a law passed by city council in September, hotels that closed entirely or laid off 75% of their staff during the pandemic must either reopen or pay severance pay to their employees out of work for up to 30 weeks.

The Hakimian organization recently filed plans to transform a 113,000 square foot Midtown project from a hotel to primarily residential, calling for 136 residential units.

Gary Barnett is a bucking developer. His Extell Development abandoned plans for a 10-story office building at 750 Eighth Avenue and instead received permits to build a 51-story hotel on the Midtown site.

[Crain’s] — HoldenWalter Warner


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