CPEX Given Exclusive On Slope's Hotel Bleu
By Lore Croghan
Brooklyn Daily Eagle
Sacre bleu! Park Slope's Hotel Le Bleu is for sale.
CPEX Real Estate has the exclusive listing for the seven-story, 48-room boutique hotel, which opened in 2007 at the beginning of a wave of lodging construction in Park Slope and Gowanus.
The asking price is $12 million for the building and the ground beneath it. The independent operator of the hotel, Gangeshwar LLC, has a 99-year hotel net lease that began in November 2007 with a rent that escalates 3% every five years.
The Rooftop Restaurant and Lounge, on the property's eighth and ninth floors, has a five-year lease that started in February 2012 with one five-year renewal option. The rent escalates $9,000 annually.
Hotel owner Domenick Tonacchio's sale of Le Bleu is “really capitalizing on the strong Brooklyn hotel sale market,” CPEX Managing Director Scott Burk, a lawyer whose team is handling the marketing, told the Brooklyn Daily Eagle.
Managing director Sean Kelly, who's also a lawyer, and associate director Andre Sigourney round out the sales team.
Tonacchio began construction on the hotel a decade ago; for many real estate players, holding onto an investment for 10 years is typical.
Le Bleu is among a cluster of Park Slope and Gowanus hotels that opened in the past five or six years “to fill the void of family-friendly lodging” – by creating convenient spots to house relatives who come for weddings, wakes and divorce parties, said Timothy King, managing partner of CPEX.
“The reason they are successful is the vibrancy of the Brooklyn economy,” King said, adding that tourists are flocking to the hotels as well.
“These people are coming from Europe or the heartland; they want to enjoy all Brooklyn has to offer,” he said.
In the two weeks the hotel has been on the market, CPEX has already received multiple offers, Burk said, and lots of queries. Interest is coming from real estate investment trusts and wealthy individual investors and private equity firms, primarily from the metro New York area but also nationwide.
“People certainly are intrigued by an offering that's not straight vanilla,” he said. With the hotel operator locked in with a 99-year lease there's the promise of stable cash flow, “but this a sexy asset class,” he said.
This type of investment is attractive to the “1031 buyer” – meaning the investor who has sold real estate and needs to make another purchase to defer capital-gains taxes – who is tired of handling building maintenance and management, King said.
The name “1031 buyer” refers to Section 1031 of the Internal Revenue Code about real estate transactions.
“It's a coupon clipper,” King said. “You get a check once a month. Life is beautiful.”
The asking price works out to $250,000 per key for the 48-unit hotel.
“For New York City that's a pretty nice metric,” said Burk, noting straight-up sales of Manhattan mid-range hotels are priced at $400,000 per key and more.
Le Bleu has gotten a mountain of media coverage since its opening. Early on, a rooftop nightclub called Vue angered the neighbors in nearby condos, and was eventually shut down and replaced.
The New York Times, in showcasing Brooklyn's hotel construction boom, dished that the Beach Boys stayed at Le Bleu during Fourth of July weekend in 2010.
The sale flyer for Hotel Le Bleu can be viewed via this link.