Watermark Capital has found a taker for the struggling Holiday Inn in Chelsea.
Two Kings Real Estate bought the 226-key hotel from the Chicago-based investment firm for $80.3 million, the city says property records filed on Tuesday. Two Kings manager Christopher Wang signed for the buyer. Brendan Medzigian, Head of Transactions at Watermark, sign for the seller.
Two Kings acquired the property at 125 West 26th Street for 30% less than the $113 million Watermark paid Magna Hospitality for the hotel in 2013. The New York-based property operator did not immediately respond. to a request for comment.
Watermark had been looking to sell the debt-ridden hotel since January in a bid to cut its financial losses. The national hotel investor fell behind on its mortgage payments in October 2020 and the loan was transferred to a special servicer in January 2021. At the time, the property was valued at $78.4 million, slightly more than his $72 million loan.
The company had avoided foreclosure by negotiating with its lender, but it was expected that a buyer would have to collect the balance of Watermark’s loan.
The Holiday Inn, located between Sixth and Seventh Avenues, managed to stay open through most of the pandemic. However, the hotel struggled to make up for lost revenue as the city’s hospitality industry slowly recovered.
After posting an average occupancy rate of 92% in 2019, the hotel was only 54% occupied last fall and its cash flow had turned negative. Built in 2006, the 64,800 square foot property spans 24 floors.
The sale of the Holiday Inn in Chelsea is the latest transaction in which a seller has had to offload a hotel for far less than it was bought for.
The Hilton Times Square was bought by Apollo Global Management and hotel investor Newbond Holdings for about $85 million, just over a third of its $242.5 million selling price in 2006.
The Times Square Sheraton was purchased by MCR Investors for $323 million from Host Hotels & Resorts. While it was the city’s biggest hotel deal in two years, the property sold for $415 million less than Host paid in 2006, when the economy and tourism were strong .
New York’s hotel sector is expected to continue its recovery this year, but it is unlikely to reach pre-pandemic levels until 2024. The Hotel & Lodging Association and Kalibri Labs estimated in April that hotels would generate 2 billion in business travel in 2022, less than half of the $4.5 billion they racked up three years ago.