Taj Boston, one of the city’s swankiest hotels, is returning to local ownership.
New England Development, the real estate firm founded by mall mogul Stephen Karp, and Eastern Real Estate said Monday that they are leading a group of investors to buy the luxury property, which has been owned for a decade by an Indian company. The group has the property under contract, with plans to keep the Taj flag out front but to “redefine the vibrant and luxurious potential” of the grand hotel overlooking the Public Garden.
The buyers, who also include developer Lubert-Adler and the private equity firm Rockpoint Group, didn’t disclose a price. But the Taj’s parent company, Indian Hotels Co., said this month that it planned to sell the property for no less than $125 million, which would reflect something of a bargain compared with other recent sales of high-end hotels in Boston.
Formerly the Ritz-Carlton, the hotel on the corner of Newbury and Arlington streets remains one of Boston’s finest, with an opulent lobby and a beloved tea service. But the building is 90 years old, and industry experts say it has fallen a step behind competing five-star properties such as the Mandarin Oriental and the Four Seasons, both on Boylston Street. Meanwhile, Indian Hotels’ financial reports indicate it has lost money in recent years.
Karp and his partners did not immediately share any plans for how they would improve performance at the hotel. Karp made his name with malls, opening Liberty Tree in Danvers in 1972 and founding New England Development shortly thereafter. The firm went on to develop Northshore Mall and CambridgeSide Galleria, as well as other retail, commercial, and residential projects in Massachusetts and across the country. Karp also serves as chairman of Boston Children’s Hospital.
New England Development and Eastern have partnered on a number of projects, most recently the newly opened University Station in Westwood. The firm owns hotels in Nantucket and Newburyport, but Karp does not have a lot of experience with big urban properties.
In a brief statement, Karp noted the Taj’s history and its location on Boston’s premiere shopping street as big draws for him.
It wouldn’t be a surprise if Karp spruced up retail components of the Taj’s lobby, or replaced some of the hotel rooms with condominiums, said Tim Kirwan, longtime general manager of the InterContinental Boston and now a consultant who specializes in repositioning hotels.
“There are a bunch of ways to spice it up,” Kirwan said. “You could do residences and a smaller boutique hotel. Maybe with a two- or three-story boutique shopping market.”
Whatever approach the new owners take, Pat Moscaritolo, chief executive of the Greater Boston Convention & Visitors Bureau, said he was pleased to see a local group with a long track record buying the place.
“They understand what this property means to the community,” he said.
Global investors have poured money into trophy Boston real estate lately, sparking bidding wars for top-tier office buildings and hotels, though it’s not entirely clear how many bidders the Karp group beat out for the Taj.
It was just this month that Indian Hotels announced it was selling the hotel — which it bought in 2007 for $166 million — in a plan to shed debt and focus on its core markets in the Persian Gulf and South Asia. But several hotel industry sources say they had heard the property was quietly on the market before then. Indian Hotels did not respond to messages seeking comment Monday.
At $125 million, or $457,875 per room for the 273-room hotel, the Taj would be fetching less than other high-profile properties that have sold in Boston lately. This year, Mandarin Oriental Hotel Group paid nearly $950,000 a room to buy the Back Bay’s Mandarin Oriental out of bankruptcy.
“That’s an extraordinarily attractive price to a lot of people,” Kirwan said. “Though the reality is that nearly half a million a key is just the beginning, when you think about renovations it needs.”
Industry experts have said that keeping the Taj name — one of Indian Hotels’ stated priorities in the sale — could dampen the sale price. So would the property’s financial losses, which topped $7 million last year on $34.1 million in revenue. Excluding interest, depreciation, and taxes, the loss was $600,000.
Still, Moscaritolo said, with good management and the right renovations, the Taj has all the potential in the world.
“It’s a one-of-a-kind property in a one-of-a-kind location. It has a storied history,” he said. “It’s a unique place.”
And soon it will belong to Karp and his partners. Pending final approval by Indian Hotels’ board, the deal is scheduled to close in July.