Deutsche buys ground lease of NYC hotel for $325m

Deutsche Bank’s real estate investment arm has recently teamed up with a local investor to take over a New York hotel’s ground lease for $325 million. 

According to a statement, Deutsche Asset & Wealth Management’s real estate investment business, formerly RREEF Real Estate, has acquired the leased fee interest in The Milford Plaza Hotel in New York on behalf of an undisclosed institutional investor. The investment is subject to a new 99-year ground lease and was acquired in an off-market transaction in partnership with New York-based investor David Werner. 

The Deutsche-led venture bought the ground lease from a joint venture between Rockpoint Group and Highgate Holdings. Although representatives from Deutsche Bank declined to comment, data provider Real Capital Analytics is listing the closing price as $325 million.

Sources told PERE that, through this deal, the Deutsche-led venture has the right to receive payments on the ground lease as well as the right to reclaim the property at the end of the lease’s term. The sale is being completed in three separate pieces: the ground lease, the hotel itself and the building's retail spaces along Eighth Avenue.

Located at 700 Eighth Avenue in Times Square, the 1,331-room Milford Plaza Hotel encompasses a block-front along Eighth Avenue between 44th and 45th streets. The property was constructed in 1928 and is nearing completion of an extensive renovation that began in 2010.

Todd Henderson, head of real estate for the Americas at Deutsche Asset & Wealth Management, said in a statement: “Acquiring the leased fee interest in a prime New York City location is expected to provide strong and durable long-term returns.”

Deutsche Asset & Wealth Management’s investment in The Milford Plaza Hotel follows other recent off-market transactions in New York on behalf of the firm’s investors. These include a $290 million mezzanine debt investment in a retail condominium located at 717 Fifth Avenue in July; the acquisition of a retail condominium, leased to UK-based high-end retailer AllSaints Spitalfields, located at 415 West 13th Street in July 2011; and the acquisition of 473-475 Broadway, a retail condominium fully leased to retailer ScoopNYC, in April 2011.