Planned Waldorf Astoria complex put on hold

The 58-story Waldorf Astoria Hotel planned for 1441 Chestnut St., next to the Ritz-Carlton in Center City, is officially on ice.

The $420 million project was to include upscale retail, a signature restaurant, seven floors of valet parking, and a spa, as well as 136 luxury condos, starting at $1 million, above a five-star hotel.

Timothy J. Mahoney III, president and chief executive officer of Mariner Commercial Properties Inc., of Ardmore, has sold his stake in the project to his partner, Brook Lenfest of Brooks Capital Group, of Bala Cynwyd.

"We realized there were structural problems in the marketplace right now, including the credit markets, softening prices, and oversupply of competing inventory," Mahoney said yesterday, in confirming his decision to sell his 50 percent stake to Lenfest two weeks ago. "We needed to come up with a strategy, and we couldn't see eye to eye on one."

The change in ownership, along with a deteriorating luxury-condo market and lack of lending, makes the timing for the project an unknown.

The Waldorf is one of nine major hotel projects proposed for Center City that have now either been delayed or indefinitely put on hold.

The former partnership envisioned a Waldorf Astoria Hotel & Residences complex on the half-acre site next to the Residences at Ritz-Carlton Tower, next to its namesake hotel.

Mahoney said in late October that his target condo buyers would be well-to-do empty nesters abandoning big homes in the suburbs for the big city.

He originally estimated construction on the project to start in January with co-developer Gatehouse Capital Corp., a national real estate investment and development firm based in Dallas. The hotel was expected to open in the summer of 2012.

Lenfest said that Gatehouse was no longer involved and that construction was not likely to start anytime soon.

"It's impossible to get lending for this," Lenfest said yesterday. "There's just no access to capital right now. Even if I pre-sold 100 percent of the residential units, I couldn't find a lender today."

Lenfest said he was still under a management contract with Hilton Hotels Corp., which owns the Waldorf brand, to fly the Waldorf flag at the proposed hotel.

"We're still committed to the project," said Kimo Bertram, director of development for Hilton. "We're in support of the developer to get the project finished."

Lenfest said that a $6.1 million sales office for Waldorf Astoria condos, housed at the former Sharper Image building at 1518 Walnut St., never opened because of dismal market conditions.

It could be a long wait, say hospitality experts. Besides the luxury-condo market cooling considerably, the luxury-hotel sector is struggling. The sector reported a 12.6 percent decline in average daily rates, the highest among the city's five hotel sectors in March, and an 18.4 percent drop in revenue per available room, the second-highest decrease, according to Smith Travel Research.

"Times are admittedly difficult right now for prospective hotel developers," said Peter Tyson of PKF Consulting in Center City. "Travel levels are down due to the economy, and most traditional financing sources are lying in the weeds waiting for someone to make the first loan."

For Mahoney, relinquishing the project was not easy. He spent nine years assembling the land and coming up with the concept for the Waldorf, but economic realities and a generous offer persuaded him to sell.

"The big unknown is what happens with commercial mortgage-backed securities," he said. "There is no market right now.

"As long as that is shut down, there is going to be a further drag on capital's willingness to fund new projects, and particularly, very large complex projects like ours was. It's not ours anymore," he said.

"It's completely Brook's baby now."