New Song for Milford Plaza Hotel

Wall Street Journal
by Lingling Wei
September 27, 2010

One of the city’s leading real-estate families is close to a deal to sell its shuttered Milford Plaza Hotel to a partnership led by private-equity firm Rockpoint Group LLC for about $200 million, according to people familiar with the matter.

The 1,300-room hotel, situated among the famous theaters of Broadway, closed in December.

A planned renovation of the hotel has been suspended as the owner­an entity controlled by Philip Milstein and other members of the family of the late Seymour Milstein­assesses its options for the property.

The deal could still fall apart, as the terms haven’t yet been finalized, the people said. But the potential sale is the latest sign of a thawing sales environment in Manhattan.

The sales volume of hotels, office buildings and other commercial property is up this year versus last but still far off peak levels.

Private-equity funds, foreign buyers and publicly traded real-estate investment trusts have flocked into Manhattan in hopes of buying prime commercial real estate at attractive prices. Most recently, Mortimer Zuckerman’s Boston Properties Inc. paid $320 million, or close to $1,000 per square foot, for an empty office tower on Madison Avenue. But prices have held up better than expected.

For more than a year, the city’s commercial real-estate industry suffered a deal drought as credit markets tightened and an ailing economy cast doubt over values and rental rates. This was painful for owners and brokers in the real-estate industry as well as for the city, which taxes property transfers heavily.

But New York hotels are becoming increasingly attractive to investors. Thanks to healthy demand from tourists and business travelers, the city’s hotels have outperfromed those in the rest of the rest of the country during the downturn.

Still, despite the recent pickup in sales, the deal volume is far below what it was in boom times. Also, there’s still uncertainty about how fast rent rolls and hotel occupancies will rise given the city’s high unemployment rate and the continuing tough economy.

The Milstein family, credited with helping to revive some of the city’s most vibrant neighborhoods, including Times Square, bought the property in 1978, when it was operated as Lincoln Hotel. It then turned the hotel into the Milford Plaza. The management of the hotel for decades had promoted it to theater-loving tourists as the “Lullabuy of Broadway.”