Dive Brief:

• Hotel investor MCR Hotels and international real estate merchant bank Island Capital Group secured $260 million in refinancing for their jointly owned 1,780-key Sheraton New York Times Square asset, JLL Hotels & Hospitality Group, which brokered the financing, announced Wednesday. 
• The loan, provided by funds managed by affiliates of Fortress Investment Group, retires $250 million in outstanding seller-financing that was sourced when MCR and Island Capital acquired the hotel in April 2022, JLL said in the release. The joint venture acquired the Times Square Sheraton hotel, said to be the third-largest hotel in New York City by room count, for $373 million. 
• The asset’s performance since the acquisition and its recent refinancing signals improvement in New York capital markets as the city’s hotel sector continues its post-pandemic recovery, JLL Hotels & Hospitality Americas CEO Kevin Davis noted in the release. 

Dive Insight:

The refinancing of the Sheraton New York Times Square’s loan is a “key component” of MCR and Island Capital’s strategy to “help the hotel capture additional market share and ensure it remains a premier destination,” Andrew Farkas, managing member, chairman and CEO of Island Capital Group, said in a statement. 

The 50-story hotel, located several blocks north of Times Square, is what Farkas calls a “landmark property.” The hotel opened in 1962 as the Americana and became part of the Sheraton hotel brand in 1979. It has since hosted several prominent events, including the New York Democratic Convention, within its 61,800 square feet of meeting space. 

The hotel also features multiple food and beverage concepts, a fitness center, a dedicated business center, on-site parking and a collection of ground-floor retailers. 

With the refinancing and continued partnership with Fortress over the next several years, the joint venture will work to “reinforce the Sheraton’s position as one of Manhattan’s leading hotels,” Tyler Morse, chairman and CEO of MCR, said in a statement. 

Already since the joint venture took ownership, the hotel’s performance has “rebounded,” Morse said, driven by the strength of New York City’s lodging market.  

“We are in the midst of a strong recovery across all segments of New York City’s hotel market,” Davis added. “This refinancing is indicative of improved debt capital markets sentiment in New York, which we expect will persist as the hotel market continues to benefit from the recovery of group, business transient and foreign travel demand.”

New York is expected to welcome 63.3 million visitors this year, up from 56.7 million in 2022, and tourist numbers are forecasted to surpass 2019 levels in 2024, according to NYC Tourism + Conventions. 

Increased travel demand has resulted in strong performance growth for the Manhattan lodging market, which saw year-over-year RevPAR growth of 23.6% in the first half of 2023, as well as increased occupancy and ADR, according to PwC. 

And the Times Square area, in particular, has seen a flurry of development activity, with multiple hotels opening in the neighborhood in recent months.