Lotte Hotel & Resorts said Monday it will acquire the land beneath The New York Palace Hotel, securing full ownership of one of its most prominent overseas assets and eliminating long-term lease risks tied to the site.

The South Korean hotel group purchased the Midtown Manhattan property’s building in 2015, reopening it as the Lotte New York Palace, but continued to lease the land from the Archdiocese of New York. After prolonged negotiations, Lotte said it reached a deal with the archdiocese to acquire the site for US$490 million, or roughly 700 billion won.

The transaction, the company said, removes the uncertainty of renegotiating land lease terms every 25 years and is expected to improve its cash flow over time. Lotte noted that the acquisition cost is projected to be lower than cumulative future rent payments, while the end of lease obligations will reduce debt and strengthen its balance sheet.

Lotte is financing the deal by liquidating existing assets and attracting outside investment.

The archdiocese, according to U.S. real estate media, decided to sell the land to help fund compensation for survivors of clergy sexual abuse. In a statement, an archdiocesan spokesperson said the church has “worked with a neutral third-party mediator to secure a negotiated settlement” for victims and that the land sale represents “our latest effort to generate resources for that purpose.”

(source)