The owners of the Waldorf Astoria on Park Avenue in New York City are preparing to place the landmark hotel on the market following its reopening in November after an extensive renovation and reconfiguration, people with knowledge of the plans said.
The property underwent an eight-year transformation that converted the original 1,400-room hotel into a mixed-use complex containing 375 hotel guest rooms and 372 private residences. The project ran roughly five years behind the originally envisioned schedule and exceeded its initial budget by more than $1 billion.
The sale being prepared would encompass the hotel operations along with adjoining restaurants, shops and other amenities. The condominiums created as part of the redevelopment will continue to be marketed and sold separately, according to those familiar with the plans.
The Waldorf Astoria is an established cultural touchstone. The hotel was the setting for the film "Weekend at the Waldorf," starring Ginger Rogers, and its Suite 2728 was rented for $1,000 a week and housed Marilyn Monroe in 1955 after she left Hollywood.
Hilton Worldwide retains a 100-year management contract for the property. In 2014 the hotel was sold to Anbang Insurance Group, a China-based reinsurance firm, for $1.95 billion. The ownership group subsequently invested roughly $2 billion on construction and related work, bringing total capital deployed on the asset to more than $4 billion.
Later, after legal action against Anbang's CEO, Wu Xiaohui, resulted in prosecution for economic crimes, the Chinese state-run Dajia Insurance Group was appointed to oversee Anbang's assets.
Those preparing the sale do not expect to recover the full amount of the cumulative costs. With an anticipated price tag in the billion-dollar-plus range, the pool of potential buyers for a flagship property under Hilton's Waldorf luxury brand is likely to be limited to a small cadre of well-capitalized investors.
Hilton has said it does not own the hotel and that it manages the property, and has directed inquiries about a potential sale to the hotel's owner, Strategic Hotels & Resorts. Waldorf Astoria and Dajia Insurance Group did not immediately respond to requests for comment, and Strategic Hotels & Resorts could not be reached.
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Key points
- The Waldorf Astoria reopened in November after an eight-year renovation converting it from 1,400 rooms to 375 hotel rooms and 372 residences.
- The redevelopment was five years behind schedule and more than $1 billion over the initial budget; total capital spent on acquisition and construction exceeded $4 billion.
- The contemplated sale would include hotel operations and adjoining retail and amenity spaces, while the new condos will be sold separately.
Risks and uncertainties
- The seller does not expect to recoup all capital outlays, introducing valuation and recovery risk for equity and debt holders in the transaction - a factor affecting the real estate and hospitality investment sectors.
- The very high anticipated price limits the buyer universe to few well-capitalized parties, creating execution risk in finding a purchaser - relevant to investment banks and brokers advising on trophy assets.
- Management and ownership transitions, including the appointment of a state-run firm to oversee previous owner Anbang's assets and the existing 100-year management agreement with Hilton, add complexity to negotiations and closing - affecting hotel operators and strategic buyers.