Marriott Bought The Clock Tower at 5 Madison Avenue

Hotel Real Estate News NYC

Marriott revealed as $165M buyer of Madison Square clocktower

MetLife Clock TowerOctober 26, 2011 08:30AM

Ian Schrager appears to be returning to the clock tower at 5 Madison Avenue.

According to Real Estate Weekly, Marriott International purchased the 220,000-square-foot office tower overlooking Madison Square Park from Africa Israel and plans to turn it into an Edition Hotel, the boutique hotel line it launched with hotelier Ian Schrager. Africa Israel was previously reported to have sold the tower for $165 million, but the buyer was only identified as "a credit-worthy" one.

Though Marriott typically does not own its real estate, the hotel operator wants to buy property for its struggling Edition line, which it hopes will compete with Starwood's W Hotel brand, to help get it off the ground. Marriott had planned to open 100 such hotels within ten years of the 2007 launch, according to the Wall Street Journal, but just two have opened thus far and one, in Hawaii, dropped the Edition moniker. Marriott has $400 million plans to open Editions in Miami Beach and London.

But both the Journal and Real Estate Weekly note that there will be challenges to building a successful hotel in the clock tower. A hotel conversion could reduce the amount of usable square feet to 150,000, Real Estate Weekly said, while the Journal noted that there was limited space for the lobby, restaurant and other amenities.

Schrager had partnered with Aby Rosen to buy a controlling stake in the building from SL Green, but turned around and sold it to Africa Israel in 2007 for $200 million. Africa Israel was near a deal with Tommy Hilfiger for the building, but the designer backed out. [WSJ] and [REW]

 

http://www.rew-online.com/2011/10/26/marriott-to-buy-clock-tower-at-5-madison/

EARLIER:

Latest:

NOT BUYING

Mr. Hilfiger's $170 million plan to purchase the Madison Square landmark and convert it a hotel is called off after he fails to secure financing. Seller Africa Israel left in lurch again.

Fashion designer Tommy Hilfiger has called off plans to purchase the Clock Tower, the landmarked office tower overlooking Madison Square Park. He had intended to convert it into a luxury hotel and condominium.

 

 

Earlier

 

Not everything is on time at the MetLife Clock Tower (Metropolitan Life Tower) – at least not concerning its proposed sale. Designed by architect Napoleon LeBrun and modeled after St. Mark’s Campanile in Venice, this landmark NYC property was expected to get a new look. With the help of Tommy Hilfiger, famous designer, JSR Capital, and a $170 million price tag, the 5 Madison Avenue building was supposed to change from clock tower to a luxury hotel and condominium.

Clock Tower Conversion

 

The conversion would address the current boutique hotel craze and attract a youthful, affluent crowd. Yet Hilfiger's plan to convert the MetLife Clock Tower into his first hotel seems to have hit a snag. According to inside sources, the popular designer is having problems closing the deal.

Property Investors

MetLife Clock TowerJust a few weeks ago, Hilfiger and JSR Capital signed the contract to acquire the century-old property near Madison Square Park. The seller, developer Africa Israel USA, and Hilfiger seem to have run into a few issues. In fact, Africa Israel is reported to be talking with other real estate investors about the clock tower property.

An Africa Israel spokeswoman clarified the situation, "Africa Israel continues to be in negotiations to sell the Clock Tower, including with the party that has signed the contract."

In 2007, Lev Leviev's Africa-Israel bought the building for $200 million. At that time, the diamond billionaire was buying up landmarks sight unseen in New York City.


Closing the Deal

Even though insiders say that Hilfiger and Africa Israel have not closed the deal, the sources have not determined the reason for the delay. It is public knowledge, however, that Africa Israel has to settle a previous agreement with fashion designer Versace. In 2008, the developer hired Versace to redesign the interiors of the Clock Tower. Originally, Africa Israel had plans to convert the tower to 55 ultra-luxury condos priced at $3,500 per square foot.

The market collapsed though and Africa Israel decided not to use Versace. Actually, Africa Israel and Versace are still negotiating the termination of that agreement. Such unresolved matters can wreak havoc with a pending sale.

Lending Concern

As well, despite the improvement in the NYC hotel industry, lenders can be wary about financing huge ventures. Lenders might be more agreeable if a veteran manager wants to turn around an existing property. The financial institutions are more cautious about funding new developments or extensive conversions.

Conversion Issues

The MetLife Clock Tower was the tallest building of its kind at the time of its construction in 1909. The office layout of this 50-storey building overlooking Madison Square Park might pose a problem for conversion. The project might be complicated and costly – even adding up to several tens of millions of dollars before completion.

Since Hilfiger has no track record for running hotels, industry executives figured that he would team with an established operator. Hilfiger is still a principal designer of his company. He sold the business, however, 14 months ago to Phillips-Van Heusen Corp for $3 billion. The parent company is not involved in the hotel project.

Hotel Brands

Reports suggest that Hilfiger always wanted to launch a hotel brand in New York City. Apparently, Hilfiger and JSR Capital (led by Jona Rechnitz, former director of acquisitions at Africa Israel) had considered other NYC properties including the Hotel Chelsea and the former New York Times building on West 43rd Street. Initially, Hilfiger and JSR Capital placed a bid of almost $110 million for eight floors in the New York Times property. Later, the team changed their minds about the bid. It is up in the air about how Hilfiger's involvement in the clock tower purchase would affect his long-time ambition about developing a hotel brand.

Hilfiger's Hotel Designs May Unravel

Other relate Article

 

MetLife ClockTower A Possible Hotel Conversion

 

Hotel Real Estate News NYC

MetLife ClockTower A Possible Hotel Conversion at Madison Avenue and East 24th Street.

MetLife Clock TowerTommy Hilfiger, the designer known for his blue blazers and varsity sweaters, has signed a contract to buy the landmark Metropolitan Life clock tower for $170 million and plans to convert the building into a hotel, according to an executive briefed on the deal.Enlarge This ImageMichael Appleton for The New York TimesThe Metropolitan Life tower was once the world's tallest.

Mr. Hilfiger, who sold his apparel company 14 months ago to Phillips-Van Heusen for $3 billion, had been scouring the city for a suitable building for almost a year. He had looked at the former headquarters of The New York Times on West 43rd Street before moving south to the clock tower, which overlooks Madison Square Park.

In recent years, a string of developers have sought to convert the MetLife tower, at Madison Avenue and East 24th Street, which was modeled after St. Mark’s Campanile in Venice, to condominiums. Mr. Hilfiger has another idea: a hotel.

Mr. Hilfiger would not be the first clothier to turn to hotels. Giorgio Armani has his name on, and is said to be designing, a chain of luxury hotels, starting with the Armani Hotel Dubai, in the United Arab Emirates.

The former MetLife clocktower at 5 Madison Avenue, the grand old gal standing guard over Madison Square Park, has been sold by troubled developer Lev Leviev for $170 million.

To Tommy Hilfiger. Who may turn the building into a hotel. That's what the Wall Street Journal thinks, and folks, we are reeling. The Madison Avenue jewel was purchased by Leviev's Africa-Israel for $200 million 2007, back when the diamond billionaire was buying up New York City landmarks sight unseen. Previous plans had called for turning the clocktower into an Ian Schrager hotel, but Leviev decided on 55 ultra-luxury condos. Designed by Versace. Priced at $3,500 a foot. For Russians and "top celebrities" only. Those were the days, eh?

More on New York TimesWall Street Journal - NY Curbed

 

NOT BUYING

Mr. Hilfiger's $170 million plan to purchase the Madison Square landmark and convert it a hotel is called off after he fails to secure financing. Seller Africa Israel left in lurch again.

MetLife Clock TowerFashion designer Tommy Hilfiger has called off plans to purchase the Clock Tower, the landmarked office tower overlooking Madison Square Park. He had intended to convert it into a luxury hotel and condominium.

Mr. Hilfiger, along with partner JSR Capital, a real estate investment company, wanted to redevelop the 41-story spire at 5 Madison Ave. into what would have been the preppy designer's first-ever hotel project. According to published reports, the partners were in contract to buy the 267,000-square-foot property for $170 million from Africa Israel USA. Sources said the deal fell apart because the would-be buyers had trouble raising the needed funds.

JSR Capital, however, insisted that there were other reasons for walking away from the deal.

“Virtually everyone in the real estate business has looked at Clock Tower as a hotel, residential, and/or office,” said Ari Schwebel, vice president of operations at JSR Capital. “Some of those were even all-cash buyers. There are reasons not one of them has closed on the building, and it isn't about financing.”

Spokespeople for Mr. Hilfiger did not return a call seeking comment, while a spokeswoman for Africa Israel declined to comment.

Article Source: http://www.crainsnewyork.com/article/20110914/REAL_ESTATE/110919950&template=printart