Monday, Mar 12, 2012


   (From THE WALL STREET JOURNAL) 
   By Craig Karmin

Dubai Investment Group is putting up for sale the Jumeirah Essex House, an 81-year-old Midtown Manhattan hotel and the crown jewel of the Middle East investor's U.S. real estate portfolio.

For the Dubai government fund, the planned sale marks the next step in its efforts to reduce property holdings in the U.S. While it is possible that Dubai could accept offers to refinance or recapitalize the hotel, a sale is considered the most likely outcome, say people familiar with the matter.

Hotel experts say the 509-room hotel, with its signature red neon sign, could fetch between $375 million and $500 million. Located on Central Park South, it has a prime location.

The drawback is that about 150 rooms in the building have been converted into condominiums and some of those apartments have the best Central Park views.

The marketing of the storied Art Deco building represents the first major move by Mark Walsh, the former head of Lehman Brothers real estate group, to improve the value of Dubai's $1.1 billion real estate portfolio.

Mr. Walsh's new firm, Silverpeak Real Estate Partners, took control of managing Dubai's portfolio of 30 properties late last year. A successful sale of the Essex House would mark another step in his comeback effort after the collapse of Lehman Brothers in 2008. Soured real estate investments played a big role in Lehman's collapse. A Silverpeak spokesman said Mr. Walsh declined to comment.

The owners have retained broker Jones Lang LaSalle Hotels to market the 44-story hotel, according to Arthur Adler, the hotel group's head of Americas. He said the Dubai Investment Group is open to bids that would keep Jumeirah Group on as operator of the hotel, as well bids that would bring in a new manager.

The Essex House opened in 1931 as the Park Tower Hotel and has passed through numerous hands in recent years. Marriott owned the hotel between 1969 and 1985, then sold it to Japan Airlines. Strategic Hotel Capital acquired it from the Japanese, and later sold to Dubai in 2005.

Dubai, which placed the hotel under its Jumeirah Group, acquired the property for about $440 million and spent about $90 million on renovations, refurbishing the public spaces and making technology upgrades, according to people familiar with the matter. Dubai also converted some of the units into condos.

While the Essex House has a prime location and is popular with business travelers, it lacks some of the coddling amenities found at midtown's five-star hotels and is priced accordingly. The Essex House's hotel rooms started at $359 a night for Saturday night, less than half the rate at the nearby Mandarin Oriental at Columbus Circle, according to the hotels' websites.

Manhattan's hotel sector has bounced back since the recession. Last year's 83.5% occupancy rate was close to the previous decade's peak, though average room rates remain below their highs, Smith Travel Research data shows. In part, those rates have been held down by new supply, hotel analysts say.

"It's a good time to sell," says Mr. Adler, who declined to comment on Dubai's asking price.

Dubai Investment Group is the real estate and asset management arm of Dubai Group, which is part of Sheik Mohammed bin Rashid Al Maktoum's Dubai Holding. Dubai has had a better investment track record than many other foreign funds active in the U.S. and it has already sold a hotel and an office building in San Francisco.

Silverpeak is expected to help Dubai Investment Group refinance projects, renegotiate agreements with operating partners and sell properties.

If the Essex House fetched $500 million, that would be about $1 million a hotel room. Last year, the average price paid for a Manhattan hotel was $472,489, a 35% increase from the 2010 average, according to the research unit of CBRE Group Inc.

(END) Dow Jones Newswires

12-03-12 0359GMT