Deals to keep flowing after Waldorf buy
09 OCTOBER 2014 8:06 AM
The $2-billion price that China’s Anbang Insurance Group is poised to pay for the New York Waldorf Astoria doesn’t represent a turning point in the deals climate, transactions experts said.
NEW YORK—Despite the nearly $2-billion price tag attached to the property, the pending sale of New York City’s iconic Waldorf Astoria doesn’t represent a turning point in this transactions cycle, according to deal experts.
China-based Anbang Insurance Group Company has agreed to acquire the hotel for approximately $1.3 million a room. Under terms of the deal, Hilton Worldwide Holdings will continue to operate the hotel for the next century.
Deal analysts said strong fundamentals and more widely available debt means the outlook for transactions remains bullish.
“It doesn’t feel like it marks the end of a cycle,” Lukas Hartwich, an analyst at Green Street Advisors, said of the deal. “This is a pretty unique deal. There will be more people looking to buy.”
Steve Hennis, a director at STR Analytics, a sister company of HNN, said it’s not unusual to see strong pricing in a leading global gateway market such as New York City and that the pricing on one asset doesn’t necessarily dictate the direction the market is headed. He also pointed to the sales of other trophy New York City assets such as the Plaza, which sold for $2 million per room in 2012.
“When you look at New York, there’s no rhyme or reason between pricing and where we are in the cycle,” he said. “It illustrates what people are willing to pay to have a trophy asset in a world class city.”
Anbang is planning a significant renovation of the Waldorf Astoria, though a specific amount was not disclosed. Hilton representative Aaron Radelet declined further comment on the deal. Officials at Anbang could not be reached for comment.
Hartwich said he expects the renovations likely will include reducing the number of total rooms at the 1,413-room property and adding a residential element.
Year to date in the United States, a total of $15.6 billion of hotel assets have traded hands, according to data compiled by STR Analytics. That compares to $13.2 billion during the same period in 2013, representing an increase of 18.2%.
“I still see strength in this (transactions) cycle,” Hennis said.
Hennis and Hartwich each said they don’t expect that pace to fall off. Hennis expects deal volume for 2014 to total $20 billion, which would be a 17.6% increase when compared to the total 2013 deal volume of $17 billion.
“The thing I focus on when I look at the market is the fundamentals, and the fundamentals look solid,” Hartwich said. “The only thing that could derail the fundamentals is some kind of demand shock that no one can predict.”
Dan Lesser, founder of New York City-based LW Hospitality Advisors, wrote in an email that a demand shock, however, is inevitable.
“Unlike hotel assets, which lease up guestrooms on a nightly basis, other forms of commercial real estate such as office and retail properties occupied with long-term credit-worthy tenants are much better insulated from sudden negative shocks,” he wrote.