Marriott International has reached an agreement to acquire the clock tower at 5 Madison Avenue according to sources.
Last week, Africa Israel USA, the property’s previous owner, announced that it had arranged a deal to sell the building to an unnamed buyer for $165 million.
Company executives wouldn’t disclose the purchaser in the transaction, which is set to close on December 15, stating only that it was “a very credit-worthy buyer.”
According to people familiar with the deal, Marriott will develop an Edition brand hotel at the location, an upscale boutique hotel concept that it introduced in 2007 and that it created to compete with popular boutique chains like Starwood’s W Hotel.
Ian Schrager, the famed hotel developer who is credited as one of the original creators of the boutique hotel concept, is a partner of Marriott’s in the Edition venture and will be involved in the clock tower’s conversion sources say. Schrager is a former owner of the property, having purchased a stake with the Manhattan landlord and developer Aby Rosen in 2007 with plans to turn the clock tower into a luxury hotel.
Schrager and Rosen, along with his partners at the time, SL Green and Credit Suisse, eventually sold the property to Africa Israel and several hotel and luxury condo concepts have since been imagined for the building, which abuts Madison Square Park and is a historic landmark. In recent months, the clothing designer Tommy Hilfiger was reported to have agreed to buy the tower for about $170 million and convert it but that deal subsequently fell apart.
The clock tower, which was once used as commercial office space, is about 220,000 s/f in size but a residential or hotel conversion could reduce the amount of usable s/f to about 150,000 s/f a knowledgeable source said.
Although Marriott typically does not own the properties where it has its hotels, hotel experts say it is not unusual for a hotel operator to buy the real estate where it will operate a location to get a concept off the ground.
“Companies like Marriott typically don’t like deploying capital that way but they will do it to get a brand going and to allow them to control their own destiny,” said Tom McConnell, an executive at Cushman & Wakefield who runs the firm’s hotel group.
McConnell said that Edition has been an especially important project for Marriott because the hotel company has been seen as conspicuously lacking an upscale chain.
“It’s a sector where they’re not really strong yet,” McConnell said.
In 2010, Marriott bought the Seville Hotel in Miami for nearly $60 million in order to turn the property into an Edition.
Marriott has had difficulties launching the brand. The hotel giant rolled the chain out in 2007 just as the economy was sinking into a deep recession that put a damper on the upscale end of the business. So far, only two Edition hotels have opened and one recently rejected the brand according to written reports. That hotel, in Honolulu’s trendy Waikiki tourist district, dumped the name on allegations that the property wasn’t attracting enough business. Marriott rejected the claims and has filed suit in that case. Another Edition hotel has been opened in Istanbul, Turkey. The company has another Edition hotel opening in London.
A Marriott spokeswoman Catherine Leitner would neither confirm nor deny the deal.
“Unfortunately, Marriott does not like to comment on market rumors and speculation,” she wrote in an email. “We are very excited about the future of the Edition brand.”
