Attention big investors: One of Boston’s swankiest hotels could be yours. If you can cobble together $1 million per room.
That’s the price real estate market watchers say the Mandarin Oriental could fetch when the Irish government auctions it off in a bankruptcy proceeding later this fall: $148 million or more for the seven-year-old, five-star property on Boylston Street in the Back Bay.
If they’re right, the sale would punch through previous records for hotel deals in Boston — fitting, perhaps, for a property where the least expensive room that’s available this weekend will run you $825 a night, and where the extremely well-heeled can drop $8,000 on a suite that’s twice as big as most three-bedroom apartments in the city.
“There are a lot of investors chasing high-end urban hotels,” said Jack Levy, senior vice president for finance at Pyramid Hotel Group, a Boston investment and management firm. “And be they private equity [real estate investment trusts] or foreign investors, they’re all very interested in Boston.”
The Mandarin is for sale because of the bankruptcy of Anglo Irish Bank Corp., which owns a controlling share of the property. It helped finance the project’s construction and bought a majority share in 2008. But the bank itself later collapsed and was taken over by the Irish government.
The bank that manages the assets of the former Anglo Irish Bank is asking a US Bankruptcy Court in Delaware to sign off on a sale of the Mandarin while the commercial real estate market is hot. Fueled by low interest rates and an influx of foreign cash, sales of hotel properties nationwide surged 47 percent in the second quarter, compared to a year earlier, according to data from the brokerage firm CBRE Inc.
This month, another brokerage firm, JLL, began to market the Mandarin, according to documents filed in court. Cushman & Wakefield is selling the building’s retail space separately, but condominiums in the 14-story building are not part of the bankruptcy proceedings.
The hotel portion will be sold at auction, with initial bids due in late November and a sale scheduled for court approval in January.
JLL would not comment, but brokers who have seen the offerings’s financial reports said the hotel is being valued at about $148 million, or at $1 million per room.
At that price, it would be the biggest hotel sale on record in Boston, market researchers said.
Last year, an arm of the investment bank Morgan Stanley bought out Blackstone Group LP’s interest in the Boston Harbor Hotel as part of a larger deal that valued the hotel at nearly $724,000 a room. Also last year, a Maryland group bought the Revere Hotel and a neighboring garage on Stuart Street for about $731,000 a room.
Since then, the market here has continued to climb, along with the price of hotel rooms in Boston. The average room rate in central Boston and Cambridge is up 7 percent this year, according to the Boston hotel consulting firm Pinnacle Advisory Group, and is projected to climb 8 percent next year.
That kind of growth — in a market already among the priciest in the country — will catch the eye of big investors looking for a good return, said Dave McElroy, a senior vice president specializing in hotel deals at CBRE. And the chance to own a very nice hotel in a city where new hotels are hard to build is likely to attract lots of interest.
“It will get very, very focused attention from the buying community,” he said. “It wouldn’t surprise me if the property achieved that [$1 million per room] level of sales.”
No matter what the final price is, one thing won’t change: the Mandarin name. Mandarin, a Hong Kong hotel operator, has a long-term agreement to run the property here, said general manager Alain Negueloua.
Auction or no, one of Boston’s swankiest hotels intends to stay that way.
“It is business as usual at the property,” he said.Tim Logan can be reached at email@example.com. Follow him on Twitter @bytimlogan.