NEW YORK - The Plaza Hotel, one of Manhattan's most famous buildings, has been sold for $675 million to Elad Properties, a private company owned by Yitzhak Tshuva. Sources in the real estate market believe the entrepreneurs are likely to turn the fabled Fifth Avenue address into a prestigious residential building.
Elad Properties is buying the hotel from Plaza Operating Partners Ltd., a partnership between British hotel group Millennium & Copthorne and Saudi Prince Alwaleed bin Talal. It was not clear how the $675 million would be split.
The Tshuva group has extensive real estate interests in the United States (New York in particular) and Canada, owning office blocks and residential structures valued at billions of dollars. Tshuva recently appointed attorney Pini Rubin as chairman of the Elad Group, which focuses on investments in Canada and owns assets worth some $ 3 billion. The appointment is seen as part of Tshuva's preparations for a public offering.
The apartment market in New York is booming, with the average price for an apartment in the city reaching some $1 million today. On the other hand, the tourism market has yet to recover fully from the events of September 11, 2001. The Plaza Hotel does indeed enjoy a good occupancy rate in the peak holiday seasons, but many of its rooms remain empty at other times of the year. In addition, the hotel requires a thorough renovation.
The 97-year-old hotel has hosted some of the world's biggest celebrities, including Hollywood stars Michael Douglas and Catherine Zeta-Jones, who held their wedding reception there in 2000. It has also been used as the site of famous scenes from such movies as "North by Northwest," "The Great Gatsby," "The Way We Were" and "Home Alone II."
But it has struggled in recent years, with owners blaming the financial troubles on a high cost base and slower business because of the sluggish U.S. economy. The Plaza ran up a pre-tax loss of $900,000 for the year ending December 2003.
"Compared with the recent earnings generated by the hotel, the sale price is an attractive exit earnings multiple," said Millennium & Copthorne chairman Kwek Leng Beng. A Plaza spokeswoman, quoting a history of the hotel called "At the Plaza," said the sale was the Plaza's fifth ownership change. The current owners bought the hotel from Donald Trump in 1995 for $325 million.
If Elad Properties does chose to make changes to the hotel and seeks to turn it into a residential building, it will have to overcome a number of tough obstacles. The Plaza is protected under New York's environmental preservation law and if the buyers wish to make changes to the building, they will be required to preserve some of its architectural elements - and this could turn the project into a very costly one. Nevertheless, real estate sources say that if the apartment market in the city continues to gain momentum, as has been happening for the past 10 years, the new owners could be successful in their venture.
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