LOTTE Hotel Buys the Land of LOTTE New York Palace Hotel
LOTTE Hotel announced on Dec. 15 that it has signed a contract with the Catholic Archdiocese of New York to purchase the LOTTE New York Palace hotel site. The acquisition amount is approximately $490 million (about 7 billion won). LOTTE acquired The New York Palace Hotel, New York’s first five-star hotel and Manhattan landmark, in 2015 and reopened it as LOTTE New York Palace, but at that time, it only purchased the building while leasing the land.
Through this transaction, LOTTE Hotel has achieved a complete ownership structure, owning both the building and land. The LOTTE New York Palace site requires lease renegotiation every 25 years, and there were projections that the burden of rent increases would be significant given the substantial rise in land values in central Midtown Manhattan. LOTTE explains that it has preemptively eliminated the risk of long-term rent increases through the land acquisition.
Benefits are also expected from a financial structure perspective. In the long term, the acquisition cost is lower than cumulative lease fees, which should improve operating cash flow, and the reduction in lease liabilities could lower the debt ratio. The company believes there is significant potential for asset value appreciation by securing both land and buildings in a prime New York location simultaneously. LOTTE Hotel is currently pursuing funding through partial liquidation of held assets and external investment attraction for this acquisition.