Knickerbocker Building
Danske Bank A/S of Copenhagen took back the former 300-room hotel property this week after Istithmar World Capital, the private-equity arm of the Dubai government's investment fund, defaulted on a $300 million loan.
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Ben Singer, a broker with Jones Lang LaSalle retained to sell the property, tells The Wall Street Journal a column of buyers is already lined up to bid on the asset located at 1466 Broadway in Manhattan's busiest and most glamorous commercial and entertainment district. Another address for the building is 142 West 42nd Street.
The 50-percent vacant building has been operated as a retail and office site for the last 30 years and became known locally as the 1466 Building. It was also know in previous decades as Six Times Square, the Newsweek Building and the Knickerbocker Building.
Istithmar World Capital had planned to re-convert it to a 300-room hotel after paying $300 million for the property and an additional $76 million for an adjoining vacant lot, according to the WSJ.
Ironically, one of the bidders today for the building is New York City-based Sitt Asset Management which had sold the property to Istithmar. Sitt paid previous owner SL Green Realty Corp. $160 million for the building in 2004.
The building is expected to be sold at a steep discount price, according to Manhattan brokers familiar with all parties involved.
"About half the hotels in New York City are experiencing some level of financial distress," Bjorn Hanson, a hospitality professor at New York University's Tisch Center told the WSJ.
"That entire (Times Square) area still is a highly desirable area for hotel development, especially if there can be views of all the neon lights and Times Square activity," Hanson said.
Dan Fasulo, managing director for New York City-based Real Capital Analytics, tells WSJ "the highest and best use for this property is a hotel."
While Danske Bank is technically marketing the first mortgage, the winning bidder also will get the deed, which is being held in escrow, according to LaSalle's Singer.
Fasulo told the WSJ the first mortgage note is being shopped at $290 million, and the property may be worth less because of the substantial capital any buyer would have to invest for renovations.
Istithmar's turnover of the Times Square building marks the latest setback for Istithmar. In December, it lost the W Hotel Union Square in New York City in a foreclosure auction. The following month, its chief executive officer, David Jackson, resigned.
Dubai World has nearly $60 billion in liabilities and is in the process of trying to restructure about $22 billion in debt.
Dubai went on a high-end hotel buying spree around the height of the market, scooping up a 50% stake in the Fontainebleau Miami Beach for about $375 million in 2008.
It bought a 73% stake in Manhattan's Mandarin Oriental in 2007, when the hotel was valued at about $340 million. Istithmar also acquired the Washington Hotel near the White House, which the firm converted to a W Hotel that reopened last fall.
Istithmar, which is segregated from the Dubai World debt-restructuring process, has invested about $15 billion in a variety of investments, using less than $5 billion in cash, with the rest in borrowed money, according to estimates from research firm Roubini Global Economics.
Financed by the family of John Jacob Astor IV, reputed to have been America's first multimillionaire, and known as the 42nd Street Country Club, the Knickerbocker Hotel was one of the most prestigious spots in midtown Manhattan when it opened in 1906.
The WSJ reports it was the initial home to the famous Maxfield Parrish 30-foot-long mural of Old King Cole, now residing at Manhattan's St. Regis hotel.
But Prohibition hurt the Knickerbocker's business, and it closed in 1921, becoming a residential, and later office, building.
Wikipedia reports world-famous opera singer Enrico Caruso was a longtime resident of the hotel up until his death in 1921. He took all his meals at the hotel restaurant, always using the same set of cutlery.
On Armistice Day, Caruso appeared at the window of his room and led the crowd outside in singing "The Star-Spangled Banner". He once gave his coat and shoes to a man waiting outside in a bread line.
Wikipedia reports that after the death of John Jacob Astor IV on the Titanic in 1912, his son Vincent Astor managed the hotel up to the beginning of Prohibition.
James B. Regan was the innovative hotel restaurant operator, and soon after he retired from the business in 1920, Vincent Astor turned the hotel into an office building.
In 1980 the Knickerbocker was converted to residential units called "1466 Broadway", but the real estate market was more profitable for commercial tenants and the building began to house showrooms and studios for the Garment District.
The Knickerbocker was listed on the National Register of Historic Places on April 11, 1980. Leona Helmsley owned the building at that time.
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