This is exciting because there will finally be some action on what is one of the few remaining wholly owned hotel properties by Starwood Hotels. (Starwood has been ridding themselves of owned properties and focusing on franchising and management). The original plans from 2007 called for an Element, Aloft and a Four Points hotel to be built on the property. It was thought that the Westin would be converted to an Element, the Clarion would be torn down and replaced with an Aloft and the Four Points. In that time frame we’ve seen the Westin stay as-is and the Clarion renew their franchise agreement. Starting on July 26th, 2011, the Clarion property will permanently close and construction will commence a few weeks later for a complete renovation and conversion into an Aloft hotel, without tearing down the building and starting from scratch.

And that’s only the first phase of the project:

I found a story in the San Mateo Daily Journal which details that the second phase will consist of a 160 room Element hotel on the property next to the aloft. The Daily Journal article also shed some light into Starwood’s original 2007 plans for the property; the Clarion was to be torn down and replaced by three hotels – an Element, Aloft and Four Points, leaving the Westin alone.

Not only that but in the Millbrae, CA Planning Commission’s Meeting Minutes are extensive discussions about the size of the signs for both an Aloft and Element.

So how will Starwood fit two hotels into a piece of land that currently holds one hotel? The Clarion included banquet hall space, and had a very large backyard/pool area. I can see the banquet space and perhaps even part of the existing hotel near the main entrance getting demolished and the pool/outside area to be shared by the Element and Aloft – much like Starwood’s Aloft & Element in Lexington, MA.

It’s good to see Starwood making an investment into this property. The Clarion has been needing some TLC for awhile now, and Starwood has been itching to make this another prime property of what their concepts are capable of.

andrew@alconic-inc.com

One thing that drives me crazy though is being at the scene of the event and taking away a completely different picture of the event than is reported in the media (I’ve experienced this NUMEROUS times with my local home town newspaper) and what amazes me is how often the media takes things out of context, or instead of following the straight road makes a sharp left (not politically ”left”).

A perfect example of this is the recent news of Ivanka Trump’s “interest” in purchasing/developing Rat Island in NYC.

Most people have never heard of Rat Island – and for a good reason, its a two-acre (I think thats being generous) rock formation that juts out of the water on the Long Island Sound, east of Pelham Bay.

Here’s a Google Map of the location:

View Larger Map

It has no power, water, nor even a dock to tie your boat up too. Lastly, in high tide most of it is underwater – if there is a storm, it’s completely underwater.

But back to my story:

Of all news organizations, the Wall Street Journal is not one I would expect to hop on this bandwagon, but last week, in an article in the Metropolis section, “A blog of reporting and news from New York City” they did just that. Now, granted, it’s not the Print Version, but this story did make the frontpage of WSJ.com which is how I found out about it.

The story says:

Talk turned to pungently named 2.5-acre piece of land, “off the coast of the Bronx,” according to a real estate listing, going up for auction October 2. Trump was not too familar with Rat Island before this reporter explained it. (“I first thought you meant Necker Island,” she said. “Richard Branson’s.”)

“Rat Island sounds really interesting,” she said, when we asked whether she’d buy it and develop it under the Trump banner. “But there’s not a lot that’s undiscovered in the tri-state area. So when there is, there’s usually a reason why it’s undiscovered.”

She stated she never heard of it before, thought the island sounded “interesting” (who wouldn’t think that – a 2 acre island for sale in the middle of the Long Island Sound?!), but then stated – if there is an undiscovered area, there must be a reason its “undiscovered” in other words – she is smart and realizes that there must be something wrong with it if there is no development on it.

And she is exactly 100% right.

But the media had a field day! If you just read the headlines you’d think she found the greatest site for the next Trump project, or was seriously considering it for a future project:

Is Ivanka Trump A Buyer for NYC’s Rat Island? – Private Island News

Ivanka Trump Mulls Rat Island Purchase – The Real Deal

Trump on Rat Island? – Metro NYC

Obviously no true “news of record” wrote an article about it (except, well.. The Wall Street Journal), in fact the NY Times, and CBS New York wrote about the island, but didn’t mention anything about Ivanka, but it’s still worth mentioning how the smallest bit of news – even if it isn’t news, can easily be taken out of context and made into something that is “newsworthy”, without even checking the facts, or taking a step or two back and thinking about what the story is actually about.

andrew@alconic-inc.com

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

Today, according to a press release from Orient-Express, it isn’t Starwood Hotels – but Starwood Capital which is taking over development of the project into a “World-Class Hotel”. So it is still possible it may be a Starwood Hotels branded hotel, I’m crossing my fingers it may be something from Starwood Capital’s hotel portfolio instead.

The press release states that Starwood Capital & Tribeca Associates

..will assume all the terms and obligations of the original contract made between Orient-Express Hotels and the New York Public Library, including the reimbursement of all previous payments made by Orient-Express Hotels and the assumption of all future payments.

After some research into the original announcement and development proposal by Orient-Express back in 2007, the project was described as this:

The five-story building on West 53rd Street will be razed to make way for an 11-story hotel, but the library will own and occupy space on the first floor and underground under the terms of the deal, the two sides said. Five floors of the hotel will connect to the “21” Club on 52nd Street, also owned by Orient-Express.

With:

150 rooms costing $750 to $2,000 per night and a restaurant on the top floor.

The hotel was originally going to be called “21″ based on Orient-Express’s “21 Club” but with the new ownership group, its doubtful it will be a 21, although there still is a chance it may connect to the 21 Club.

I’m eager to see what Starwood Capital chooses to brand this site, as well as a their other recent purchase of 1414 Ave of the Americas only 5 blocks North.

andrew@alconic-inc.com

Morgan Stanley — after failing to raise money for Revel last month — is launching a new $1.15 billion debt offering so Revel can finish construction, sources said, confirming a Standard & Poor’s LCD report.

The bank, which has hired JPMorgan to sell the loans, meets potential investors today.

Christie’s motivation seems to be based on the need for more jobs in NJ. What Christie seems to be ignoring is the fact that Atlantic City is losing a lot of visitors to Philadelphia and other out-of-state casinos.

One thing that will help projects like Revel and the Borgata is it’s focus on more than just gambling.. Atlantic City’s “Super casinos” such as Borgata, Revel and even Harrah’s and the Tropicana are able to tap not just the gambling public by having restaurants branded by celebrity chefs, popular nightclub venues, and headlining acts that cater more toward the younger set vs the platinum set.

No matter what, the finishing of Revel will give Atlantic City a big morale boost, and when its finished – bring in more visitors eager to see this new casino who will trickle out to the other casinos in town.

andrew@alconic-inc.com

Probably not, but it seems as though you will over the coming years. Oh yea, and Marketside is being developed as a new concept by Walmart.

Currently Marketside has four stores, each one around 20,000 sqft – a larger than your typical Walgreens or CVS drug store, but drastically smaller than the typical Wal-Mart or Target stores. Marketside is very similar to Tesco’s Fresh & Easy stores which are popping up all around California, Nevada and Arizona, and the concept even reminds me of a more “corporate” Trader Joes with its push on organic and natural food products. The Marketside branding doesn’t openly mention Walmart, but it isn’t trying to hide its affiliation with Walmart either – just checking on Marketside’s website shows a “Copyright Walmart Stores” at the bottom of every page.

(Here is a video of Marketside from YouTube)

It’s a great concept and I love the idea of being able to create a new stand-alone brand that fulfills a need

Crain’s New York Business today published an article from the Associated Press signifying Wal-Marts intention to expand in urban areas by growing it’s Marketside brand:

Wal-Mart Stores Inc. is planning an aggressive push into urban markets with a new small format that’s a fraction of the size of its supercenters.

The expansion, expected to be spelled out next month at the retailer’s meeting with analysts at its headquarters in Bentonville, Ark., is aimed to pump up sluggish U.S. sales.

Real estate executives said that over this past summer, the world’s largest retailer has been scouring for small locations, around 20,000 square feet, in urban areas including New York City, San Francisco and other cities. That size is larger than a typical drugstore but smaller than a supermarket.

WalMart has been trying to make inroads to urban areas – especially the New York City market – for years, but has constantly been rebuffed by both high property prices and opposition from citizen groups who are afraid Walmart will do more harm than good in their neighborhood.

Opening up these smaller stores may bring an increase in sales, but it’s interesting to see Walmart take their growth in this direction. Ever since they started, Walmart was the place to buy everything, hence the superstores of +100k square feet, an expansion into groceries has quickly given them the title to Americas largest grocery store – but people still go to Walmart primarily for things such as clothes, furniture, dvds, household goods etc.

Opening up Marketside stores in urban areas such as NYC will do nothing to quell the demand for a typical Walmart, (nor will it make it easier to open their Supercenters) but if they are able to keep grocery prices lower than the competition in these metro areas, it will quickly spell the end to more established (and overpriced) names such as Gristedes and Food Emporium which have dotted the urban NYC landscape for decades.  I can picture the backlash now: Walmart’s little child pushing out the established players – essentially the same opposition that Walmart has been facing for years with their Supercenters, except now instead of having a Supercenter put an entire downtown out of business, it will put out the grocery stores that have never seen competition like this before.

Walmart is a double-edged sword, bringing benefits to customers, sometimes at the expense of the employees, suppliers and everyone else down the supply line..

Economists have tried to answer the question for years – is Walmart good or bad for the economy and for America as a whole – now Marketside will only add to the question.

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

I just came across a news article about a Kmart store in Iowa City, Iowa which is testing a new concept – a laundromat which will be on the side of an existing Kmart, it will be called “Kwash”

The chains intention is to draw additional shoppers and their time by offering low cost laundromat services. While their clothes are being washed, they can shop in the KMart store, or vice versa. In addition the laundromat area will have free wi-fi.

Kmart is testing the concept in Iowa City, Iowa because they feel the demographics are right there for this type of service, and its hoped that more people will shop Kmart because of the service. It’s interesting that Kmart is pursuing this because the type of demographic which utilizes laundromats is typically on the lower end of the income spectrum.

Its no secret that Kmart is quickly losing the battle of the discount stores, with WalMart & Target putting more and more money into their stores to make them appealing tot he customer, whereas Kmart is essentially letting their stores rot.

WalMart & Target also are increasingly going toward the higher end customer – WalMart is starting to bring in name brands that typically would not be found in a discount store and Target (often referred to as ‘TarJay’) has been catering toward the higher end clientele during its exponetnal growth over the past few years.

Kmart and Sears Holdings are beating to their own drum, and it will be interesting to see how the chain/company hold up a year or so down the line, – especially since their recent earnings showed over a 25% drop in income. Trying to bring in more and more customers who are only looking for bargains is not going to bring them out of their doldrums.

Although, it may give them good exposure for their Kenmore washer and dryers – but then again, those are the same people who probably won’t be buying them anytime soon either.

andrew@alconic-inc.com