The Further Decline of Union Square: The W Hotel Foreclosure Auction

Beyond the drama of the big numbers, here’s a helpful explanation of what happened to the W Union Square Hotel, which had a fun and dramatic foreclosure auction yesterday. (Union Square! Such carnage, all around!) “Basically, Dubai World (or its investment arm, Istithmar) paid $282 million in total for the hotel, and took out a $115 million mortgage. Istithmar put down $50 million of its own money, and borrowed the rest in what’s known as a ‘mezzanine’ transaction: $117 million of high-yielding debt which isn’t secured against the property…. Lots of people are extremely worried about commercial real estate at the moment, saying that it’s the next shoe to drop. But a $240 million valuation still works out at almost $800,000 per room, which is still a lot of money for a hotel which no one likes very much.” Amen to that.