Marriott adding 3rd hotel in N.Y. $141.5 million for Vista is reported to be 65% of cost to build it today

November 10, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Host Marriott Corp. announced yesterday that it has contracted to buy the Vista Hotel in New York for $141.5 million, the Bethesda-based lodging owner's largest purchase to date under a two-year strategy to acquire luxury hotels.

The 820-room project, part of the World Trade Center complex in Manhattan's financial district, represents the third purchase by Host Marriott in the past week, after announcing deals to buy upscale hotels in Toronto and Marina Del Rey, Calif., for a combined $48 million.

As it did in other recent purchases, Host Marriott bought the 22-story project for just 65 percent of what it would cost to build today. The company declined to provide estimates on how much the Vista would contribute to earnings before interest, taxes and other noncash charges.

"This hotel represents another excellent conversion opportunity for Host Marriott," said Terence C. Golden, Host Marriott's president and chief executive. "This hotel should provide strong returns for our shareholders."

The Vista, a 14-year-old project being sold by the Port Authority of New York and New Jersey, received a $65 million renovation and was nearly completely rebuilt in the aftermath of the World Trade Center bombing in February 1993. It re-opened last November.

The Port Authority, which has owned the hotel since buying it from Kuo Hotel Corp. in 1989 after revenues and occupancy slipped, had a total investment of $138 million in the project, said Allen Morrison, a Port Authority spokesman.

A 99-year ground lease with Host Marriott is expected to generate an additional $14 million for the authority, which owns the land under the Vista, Mr. Morrison said.

Host Marriott expects to finalize the purchase by year-end, raising its portfolio of hotels to 89. Thus far in 1995, the company has invested $359 million to buy eight hotels in Texas, Canada, California and Alabama.

The purchases have added 3,500 rooms.

After the closing, the hotel will be operated by Marriott International Inc., the operating firm created by the October 1993 split of the former Marriott Corp.

"This is an aggressive company, because they know they can buy hotels at a significant discount to replacement cost," said Jack Kasperzak, a hotel industry analyst with Davenport & Co. "With Marriott International, they have a high confidence level that they can come in and make a property profitable."

Still, Host Marriott will face the challenge of increasing the Vista's 70 percent average occupancy rate, a figure that by industry standards means the hotel is less than profitable.

The Vista Hotel purchase also strengthens Host Marriott's position in New York. With the addition, the company will control three hotels containing 3,393 rooms.

"Of all the Manhattan hotels, this clearly has the best location," said Nicholas A. Hill, a Host Marriott spokesman.

"And New York is a strong market now."

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