There is no information on branding of the property – which is of special interest to those who follow Starwood Capital & Barry Sternlicht – so no word on if it will be a “Sternlicht inspired” hotel (eg – 1Hotel or Baccarat),or if it will be a Hyatt or other established brand. But they did have a picture, and some basic facts – 340,000 sq ft, 120 key 5-star hotel, and another 140,000 sqft of residential with hotel amenities.

It’s difficult to tell just by the appearance of the building – but it does show a few elements which could be unique – an outside pool deck area mid-building and a grassy/tree-filled terrace on the upper third of the building as well.

Starwood Capital’s Other NYC Hotel Projects

HotelNewsNow.com reported that Barry Sternlicht recently stated that he has three hotel projects currently on the drawing board in NYC: The Donnell/Tribeca Associates project mentioned above, the conversion of 1414 Ave of the Americas, and another unannounced project that he’s keeping close to the vest. Once again, there is no word or indication as to the brands of these hotels – will they be Starwood Capital brands, or will they be branded with other well established luxury brands?

I’m thinking that these projects will be some type of new or unique brand to Starwood Capital because typically they will not make a big deal in the press or market about “just another hotel transaction”. I’m sure we’ll find out one way or another over the next few months.

andrew@alconic-inc.com

Yep.

A kitchen vent.

Makes sense though, Conde Nast is famous for their cafeteria, much has been written about it, the food is excellent, the patrons are the creme de la creme of the publishing world and the architecture and design of the place is out of this world. Plus, since this vent will also be used for Conde Nast’s test kitchens as well as the cafeteria, it’s big – one story high and 25 feet wide.

I had heard a quick blurb about the vents being a potential deal breaker, but the NY Post had a great story on it recently which shed some more light on the issue.

Not to worry, the vent won’t appear as an eyesore similar to the vents on the side of the Borgata in Atlantic City, or the Goldman Sachs Tower in Jersey City – this vent is costing $1 million, including specially designed glass panels which help to disguise it’s appearance. From how the article sounds, it’s going to be difficult to tell its even there unless you know what you’re looking at, and it’s going to be on the North Side, not the Southern Side which faces the WTC Memorial and the rest of Ground Zero.

Just goes to show how what may seem to be the most inconsequential item on a tenant build-out can end up being a major deal breaker.

andrew@alconic-inc.com

The Wall Street Journal had a story today on how Apple’s mall stores are beginning to act almost as anchor stores in shopping centers, much like Department Stores are expected to be the major draw for a mall. In a lot of malls, the little 4-6,000 sq ft Apple Store is bringing in more visitors (and revenue) than the 100,000 sq ft Macy’s or Nordstrom’s. The issue it is causing is the huge disparity in revenue per square foot vs rent per square foot.

Now, I’m no expert in Retail Shopping Center leasing terms, so I could be off on a few points – please correct me if so..

According to the WSJ article, the average Apple store pays about $480,000 a year in rent – working out to $80 p/sf a year for a 6,000 sqft store, whereas a JCPenny’s store  pays on average $439,000 a year in rent; with a 100,000 sqft store that means a store like JCPenny’s pays only $4.39 a square foot! Another comparison can be for revenue, the average Apple store makes $34.1 million a year, whereas JCPenny’s makes $16.1 million a year. One point the article doesn’t make is the percentage of revenues that malls get in addition to rent – or if that is already factored into numbers provided.

Sure, you can argue it’s like comparing a Brookstone to Radio Shack; the average receipt at an Apple store skews much higher in the $1,000 even $2,000 range compared to the majority of purchases at department stores of a few hundred – if that after all the promotions and sales that always seem to be occuring.

With the draw that the Apple Stores have, it’s not inconceivable that Apple may start asking for allowances that the typical in-line mall retail store would never consider; such as billing on the Mall’s outside facade or directional signs throughout the parking lots, significant rent/tenant improvement allowances, or prime space that would typically go to another non-anchor tenant that has much larger space requirements.

It puts mall landlords in an unenviable position that will hurt a lot of egos, since this small store is beginning to have such an impact on the overall traffic of the mall, the scales are starting to tip in favor of the small guy in the mall compared to the past where the department stores were always the big guy. Apple is a smart company – it’s only a matter of time before they will start taking advantage (and rightly so) of their growing popularity.

andrew@alconic-inc.com

Not the least, it’s exterior design has been derided since its beginning due to its colors and appearance as someone drives down the Turnpike.

Triple 5, the same company that owns the worlds two largest malls – Mall of America and West Edmunton Mall in Canada – is committing $1 billion dollars to finish the project – and even expand it. I have to say, if there is a company that has the experience and ability to do this, its Triple 5.

Triple 5′s intentions are to use the additional parcels of land adjoining the property that was once to be used to create hotels and office buildings to build an indoor water park, a second parking garage, a skating rink and “other entertainment features that have proven successful at the companies other properties”. If the Mall of America is an example – an indoor water park branded by Nickeloden called Nickeloden Universe, a movie theatre and perhaps an aquarium and an indoor mini golf range.

The NY Times broke the news yesterday and quoted a number of people who have their doubts about the project. I think they couldn’t be anything but wrong – they have New York City only 20 minutes away, a train station literally feet away that has an almost direct ride from Manhattan, and a football stadium which is home to two of the most popular NFL teams – the NY Giants & Jets. With the right management and the monetary backing, I cannot see this project being anything but successful.

Triple 5 is also going to rename the project – American Dream @ The Meadowlands, which is great because it gets rid of the Xanadu name which was really horrible to start with.

One aspect that Triple 5 is also due to change is the exterior of the building. Everyone has stated that the exterior colors is such an eyesore for the project and will actually scare people away. It amazes me that people find the exterior ugly compared to a typical mall or large building which is nothing but huge flat walls with one monotone color throughout. One of the necessary evils of a building like this is a small amount of windows since malls don’t have windows, it’s not an office building or a hotel. No one goes in to look out. I will admit though, the drab wilderness of the Meadowlands that surround the property on one side completely conflict with the colors and design of the building as it stands now. I’m very curious as to what they will come up with as a new design.

With the signing of the agreement, Triple 5 has until the end of this year to close on the transaction, and I think they will be able to do it. And hopefully prove the naysayers wrong.

andrew@alconic-inc.com

In the last few hours my email inbox has been bombarded with news that Barry Sternlicht’s Starwood Capital has purchased 1414 Ave of the Americas in Manhattan for a conversion into a hotel. This is pretty exciting news because its one of the first purchases that Starwood has made in years on a property to be converted or built from scratch in the lodging industry. I’m not going to sit here and claim that hospitality development is finally on the upswing because of this purchase; but I will say that Starwood Capital would not have moved on this property if there was not the potential of a huge upside. Purchasing a 110,000 sqft 18 story, almost 100 year old building, one block from Central Park in mid-town Manhattan for $72 million is a pretty darn good deal.

1414 Ave of the Americas is a pretty low-key building, for years it was used as office space and ground floor retail, although in 2009 it made the news when Ian Schrager was looking at it for one of his hotels (prior to Edition). Unfortunately at the time the owner lost the property when the mortgage was sold and Schrager’s project never got off the ground.

The building was even originally built as a hotel – and apparently KISS had outdoor concerts on the rooftop years ago, although I cant seem to find any information as to when the place was last a hotel – the earliest article I could find about the property was from 1992 when SL Green first purchased it and converted it from a “shoe building” (catered mainly to the footwear industry) into regular professional office space.. And professional office space its been since then, although now it is almost completely vacant – making it ready for an immediate renovation.

There already has been some speculation that Schrager may be involved with this new purchase – but I find that highly unlikely.. It would be a huge reversal for Sternlicht as his name will bring the same (and probably even more) cachet to any hotel project.. Barry may not have “invented” the boutique hotel industry – but he definitely did popularize it and make it mainstream.

So what could the future hold for 1414 Ave of the Americas? Its tough to say.. Will Starwood & Sternlicht team up with Hyatt or Starwood Hotels or even use his brands from Groupe Du Louvre (Golden Tulip) or perhaps some other large luxury hotel brand? Or will this finally be the beginning of a long line of hotels from the SH Group which never really got off the ground after the economic shakedown of the past few years..

Ah – this news will have my heart pumping fast tonight!

andrew@alconic-inc.com

My friends over at VegasChatter seem to think this could be the first Barry Sternlicht-ing of Vegas since the days he used to operate CaesarsWorld in the 90s. I’m not so convinced.

Sure, Sternlicht and Starwood have been involved with trying to take over the Riveria for years now.. Just do a Google search for Rig Acquisitions Sternlicht and you’ll see what I mean. But there is something else that Sternlicht sees in the property – it can’t be the building, its small compared to the rest of the Vegas casinos, its not in the ‘heart’ of the Strip – in fact its almost in no-man’s land compared to CityCenter and other ‘it’ casinos; its surrounded by the unfinished shells of Echelon Place & the Fontainebleau and casinos of yesteryear like the Las Vegas Hilton & Circus Circus.

It could very well be that Sternlicht sees the potential in the site come, 10 – 20 years when projects like Echelons Place or The Plaza ever get off the ground (if they ever do that is!)

Or.

Sternlicht could just see a good deal.. after all, the Riveria has been on its last legs for a few years now – before any economic downturn even started, and buying a mortgage for 50 cents on the dollar, well.. that’s just a good investment, and that’s really what Starwood Capital is all about.

andrew@alconic-inc.com

Another day, another casino in the sights of the Starwood Capital Group.

What’s going on here?

It’s interesting to watch how Starwood Capital has shown so much interest in Las Vegas casinos over the past month or so – the past few years even if you consider their initial bid for the Riveria on the strip.

Although its all rumors at this point, Bloomberg Business Week has a story about Starwood Capital’s (and Colony Capital’s) interest in purchasing the Rio casino from Harrahs. Harrahs has been looking to divest the property since they purchased the Planet Hollywood and is looking for interested bidders. Harrahs purcahsed the Rio in 1998 for $888 million, and according to the Business Week article – the property is only worth $500 million now.  

So why are all these private equity firms looking to get into the casino business? Its interesting to watch Carl Icahn place a bid on almost every project in Atlantic City & Las Vegas that is having financial difficulty, Starwood Capital’s interest in the Riveria and now apparently the Rio, along with Colony Capital’s current ownership of the Hilton Las Vegas and Atlantic City. Why?

I’d think that it would be too much trouble to go through the gambling licensing procedures for a private equity firm to even consider dabbling in this, but if you look at the history of these three firms – they have gambling in their blood.

Colony Capital has owned the Hilton in Las Vegas since 2004, the Atlantic City Hilton since 2005 and Resorts International since 2000.

Carl Icahn purchased the Sands casino in Atlantic City in the early 2000′s but quickly sold it to Pinnacle Gaming, but now he owns the unfinished Fontainebleau and the Tropicana in Atlantic City

Barry Sternlicht, from the Starwood Capital Group was probably the first out of these three to get into the casino business with his purchase of ITT-Sheraton which included Caesars World in I believe 1998.

Its interesting to see what everyones intention will be – its known that casinos are great for their free cash flow – something a Private Equity firm loves, but its obvious that some people look at the purchase of a casino as just a passing investment – similar to how Carl Icahn has looked at his investment in the Sands in Atlantic City and possibly how he will look at the Fontainebleau once the economy picks up.

andrew@alconic-inc.com

Over the last few years Dubai has been the center of all construction activity in the world, the city-state has come from being a barren desert to a major city with high rises, luxury shops, apartments, and offices at every turn. Everytime I came across a boom-time story about Dubai, I become even more skeptical about the longterm prospects of the area.

How is it possible that an area of that size can sustain that much development in such a short amount of time. How can they fill so much office space, hotel rooms, condos, vacation homes, luxury retail stores, etc. Where will the people come from? Do you actually expect millions of people will get up and move to Dubai in such a short amount of time? It seems the only legitimate “industry” that Dubai has was based on the expectation that the area would continue to grow and prosper; the question always remained (and continues to do so today) is: What would be the economic impetus that would enable it continue to grow and prosper.

Dubai has a population of 1.4 million people, from stats I’ve read – 90% of those people are there for construction jobs of one type or another. Even countries such as China – which has a population of over 1.3 BILLION (over a much larger area of course) is not on a building boom like Dubai. What were Dubai’s rulers thinking? How did they expect to sustain all of this? What were the foreign developers thinking?

If you look at most developed countries and the large cities within them – they exist based on a certain unique industries. The cities and countries have slowly grown and developed based upon those industries over centuries and decades. Dubai wasn’t even on the map 10 years ago. Most American people have never even heard of Dubai until the last few years.

Sure, Dubai has oil – but all the oil fields are owned by the Government. Tourism is there, yes, the weather is always beautiful and beaches are nice – but the heat is at times unbearable which ends up putting a limit on the tourism potential. Who is going to go on vacation to Dubai – a 12 hour plane trip from NYC – to sit on the beach in 100% humidity and 120 degree desert temperatures? Not very many people.

Could the rapid development of Dubai end up being one of histories largest mistakes? In 10-20 years, will Dubai become a barren, abandoned waste land?

Money may buy buildings, it may buy roads, but after awhile Economics 101 kicks in and reality hits.

andrew@alconic-inc.com

In 2001 a company called Asbury Partners purchased most of the waterfront land in Asbury with the goal of tearing down eyesores, rebuilding the infrastructure and building retail and housing components. 8 years later – there has been significant progress, but not at all the amount of progress Asbury Partners and the general public was hoping for.

Locally, the skeptics all claim that Asbury Partners was another sham developer who never went through with their promises, etc etc – but I’m a firm believer that Asbury Partners did A LOT, and their main downfall was due to the economic fallout that has been experienced throughout all development in the world.

I think it deserves to be mentioned how Asbury Partners brought in Madison Marquette to spearhead the boardwalk re-development. That is – development on the boardwalk. Madison Marquette has done an amazing job reinvigorating the boardwalk and the retail components on the boardwalk. They’ve even gone above and beyond what they initially “signed up for” by purchasing a condo development (Wesley Grove) that would have gone into receivership and provided another black eye to Asbury.

Today I found out that Asbury Partners has essentially defaulted on the loans they took out to purchase the waterfront property and it will be taken by iStar Financial, who will then become the Master Developer of Asbury.

(Bit of a side note: iStar Financial was started by Barry Sternlicht and Starwood Capital in 1993, in 1999 it was spun off into its own independent company. I just love learning about the influence that Starwood Capital has had.)

In the article from the local newspaper (Asbury Park Press) it states that iStar will essentially become the Master Developer – and will look to get its money back from the defaulted loan by selling the individual properties that Asbury Partners currently owns.

Whats odd about this arrangement is that iStar doesn’t seem to have any experience in real estate development.. iStar is a financial company which deals in real estate transactions.. From their website:

Today, iStar is a true “one-stop” private banker to high-end commercial real estate owners in the U.S. and internationally. We are primarily an on-balance-sheet lender with a full product range of capital solutions, from senior and mezzanine real estate debt to senior and mezzanine corporate capital, to corporate net lease financing and equity.

I have to say – iStar is a good company but I really have my doubts about them becoming the Master Developer of Asbury. It almost sounds as though this is a project that fell into their lap due to the economy, and instead of calling it a loss and writing it off – they are trying to make it work – by getting involved in something that is not entirely their forte.

My only hope is that iStar knows what its doing and really does have Asbury’s best interests at heart. I understand they have to make a profit – but at the same time, Asbury has been through so much troubled times..

Please don’t add to it.

andrew@alconic-inc.com

Starwood has leased 250,000 square feet at 333 Ludlow Street – in a development that seems to be still under construction – and will begin moving on January 2012. Apparently Starwood will do a major renovation to tune of $40 million but it’s unclear if the building has ever had a tenant before (reports are conflicting). It’s located in Stamfords up-and-coming Harbor Point section which used to be an industrial site.
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From what the press releases state – the building will be a brand showcase for Starwood and will be a LEED Certified building. We can only speculate as to what a brand showcase means – but I can picture demo rooms of each of their brands, as well as the office space for each hotel brand of Starwood being decorated similar to how the actual brand is decorated. Keep in mind – the Luxury Brand group which encompasses LeMeridian, St Regis, W Hotels & The Luxury Collection are still located in New York City and will be unaffected by this move. The Luxury Brand Group itself is just moving into a new building now too.

It’s really interesting to note the differences between Starwood’s move and Hilton’s move (remember, Hilton moved from Beverly Hills, CA to Tysons Corner, VA over the summer). Hilton announced in January, 2009 they were scouting for locations in the Virginia/Maryland/Washington DC area. Two months later, in March it announces it’s found a location – about 100,000 sq ft in the Park Place II development at Tysons Corner, move in date? August 2009. Investment? $17 million. LEED (or anything having to do with Green) being part of the building? None.

I was pretty shocked myself when I found out that Hilton was able to find a site so fast, then do a renovation and move in 6 months away, Starwood’s time frame is ALOT longer, but it sounds as though they are going to be building a very unique and one of a kind headquarters. There is something to be said for the amount of employees each headquarters will hold: Hilton: around 300, Starwood’s: 800, but it’s still interesting to see the differences between how the two companies are managing or have managed their headquarters moves.

It’s also interesting how Hilton didnt seem to give their employees much notice for a move on the complete other part of the country, whereas Starwood’s new headquarters is 20 minutes North East of White Plains, and is an even easier to get to if the employees takes public transportation.

I guess you could say I’m reading into it too much (time difference between Hiltons & Starwood’s move) but I think it just goes to show that Starwood is all about the brand experience – they are taking the time to build an environment that the employees will embrace and be able to feel part of the company, rather than just simple cubicles and nice paintings on the wall..

andrew@alconic-inc.com