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late last month, Chinese holding company Anbang Insurance Group announced with much fanfare that the Waldorf Astoria New York will be closed for three years beginning spring 2017. During this time, the existing 1,400 room hotel building will undergo a US$1 billion conversion to luxury condominiums with roughly 300 to 500 hotel rooms remaining post renovation. I was perplexed with the purpose of this recent announcement as the investment thesis for Anbang’s US$2 billion acquisition, which occurred nearly two years ago, has not changed.

I would have thought that prior to committing to a US$3 billion investment, a detailed business plan would have been thoroughly developed and that at this point execution of the proposal would have been well underway.
Given the recent dramatic slowdown in the ultra-luxury New York City condominium market, the economics of the Waldorf Astoria New York redevelopment plan clearly differs today compared to when the asset was acquired. Consider the penthouse at NYC’s Baccarat Hotel and Residences, which recently transacted for US$42.55 million, down 29% from its original ask of US$60 million. Furthermore, New York City developers are rethinking their recent top of the market strategies. For example, in 2013 an investment group purchased Manhattan’s Sony Building for US$1.1 billion and planned to convert the 37-story skyscraper into a luxury hotel and condominiums. Instead, this past spring the property sold for a reported US$1.3 billion to foreign investors who plan to keep the property an office building.
On the other hand, during spring 2016, another Chinese entity, Greenland Group purchased a 41% stake in the Park Lane Hotel on Central Park South from a Kuwaiti investment company, and declared resurrection of a previously shelved luxury condominium conversion plan. This move contradicts an announcement at the beginning of this year by lead investor Witkoff Group that "velocity is not what it was" and that plans to demolish the hotel and build a 1,210 foot tower with 88 units was being abandoned. It will be very interesting to witness what ultimately occurs with both the Waldorf Astoria New York and the Park Lane Hotel New York.

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