Hong Kong private equity shop Gaw Capital Partners is reported to be in talks to add a boutique New York hotel to its $8 billion global property portfolio. Sources told The New York Post that a Gaw-controlled fund is in advanced negotiations to purchase the Standard Hotel in Manhattan’s meatpacking district for $340 million.
The purchase price is 15 percent less than the $400 million the hotel was contracted to sell for in a reported 2014 deal that never closed, pointing to challenges in New York’s hospitality property market.
The acquisition would represent Gaw Capital’s first high-profile investment in the city, following a series of real estate deals in California and Chicago in recent years.
Gaw Jumps into New York Hotels During a Down Market
Completed in 2009, the 18-storey Standard Hotel straddles the High Line, an elevated rail track that was converted into a park, at 848 Washington Street in lower Manhattan. The hip, 338-room luxury hotel features floor-to-ceiling windows with views of Manhattan and the Hudson River.
Hotel management firm Standard International was reported to be in contract to buy the property from hotelier André Balazs and his institutional partners Dune Capital Management and Greenfield Partners in early 2014. The acquisition price of $400 million, equating to about $1.2 million per room, was one of the highest in the city since the previous market peak in 2006.
Despite subsequent news reports that Standard International had bought the hotel, however, the company debunked the widespread belief that the deal had been completed, telling The New York Post: “The original owners still own the property.” Standard International did not comment on the potential Gaw deal and the newspaper could not reach Balazs, who owns a 20 percent stake in the company.
Does NYC Have Too Many Hotel Rooms?
The slump in the hotel’s value since 2014 is explained by the property’s shrinking revenue per available room, occupancy rate, and food-and-beverage income in the face of greater competition, according to analysts cited by the newspaper. Nearly 16,000 new hotel rooms are projected to launch soon to New York, where supply already stands at a record high of 115,145 rooms, even as home-sharing startup Airbnb chips away at demand.
The Standard Hotel is said to be particularly exposed to food-and-beverage competition, as its trendy eating venues including a steakhouse, beer garden, outdoor cafe and penthouse club are said to account for a high proportion of the hotel’s income.
Hong Kong PE Shop Moves Beyond California
If completed, the transaction would mark a milestone for family-run Gaw Capital, whose American subsidiary, Gaw Capital Partners USA, has over $2.7 billion in gross assets under management. Among other deals, in July 2016 Gaw’s US affiliate partnered with a Chicago developer to buy a 285-room boutique hotel in the midwestern city for $60 million. Gaw and Shapack Partners paid roughly $210,000 per room to acquire the Public Chicago Hotel from boutique hotel specialist Ian Schrager and Morgan Stanley.
This past May, the cross-border private equity firm agreed to purchase the Marriott City Center hotel in Oakland, California for $143 million, according to sources who spoke with Mingtiandi. The acquisition came amid a string of California deals by Gaw-controlled businesses, including the $42 million purchase of a Mission Street office building in San Francisco.
Privately-held investment firm Downtown Properties, which is also controlled by Gaw Capital chairman Goodwin Gaw, last year sold out its interest in 285 Madison Avenue office building in New York, after jointly acquiring the 530,000-square-foot pre-war office building with RFR Properties, GreenOak Real Estate and East End Capital in 2012.