New York City Losing More Hotel Units to Residential Conversion

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New York City Losing More Hotel Units to Residential Conversion January 17, 2006 By Russ Colchamiro, Executive Editor Following a recent trend of hotels slated for residential conversion that includes The Plaza, St. Regis, Mayflower and Stanhope hotels, two more New York City hotels--the Mark and Swiss�tel The Drake--are soon to follow. "We've seen the conversion of several 5-star hotels on the Upper East Side," Tom McConnell, senior managing director of the hotel group at Cushman & Wakefield Inc., told CPN this morning. "We're seeing a shift of the epicenter of ultra-luxury hotels to Midtown. Fifteen to 20 years ago, the highest rated hotels were on the Upper East Side." Word of the two hotels' conversion was first reported in today's New York Post. McConnell explained that when the Mandarin Oriental Hotel Group, which owns the Mark (pictured), developed a new Mandarin Hotel at the Time Warner Center at Columbus Circle, it obviated the need for a second Mandarin product in New York City. And since The Mark, located at East 77th Street between Madison and 5th avenues, is a lease-hold, McConnell explained, the property will likely have to be converted for co-op. As for the Drake, McConnell noted that economics is behind the sale, with reports that the 495-unit property, located at 56th Street and Park Avenue, likely will be demolished for condo, mixed-use or even possibly hotel-condo conversion. "It's been a profitable hotel," he said. "But when you look at the economics of hotel ownership versus potential residential at that site, the difference is night and day." Offers for the Drake are expected to be in the mid-$400 million range, the Post report said. While the condo conversion trend in Manhattan is removing more rooms out of the market, it helps the remaining hotels sell out. "The hospitality market in New York City is becoming underserved," said Darcy Stacom, executive vice president of the investment properties group at CB Richard Ellis Inc. "(But conversions from hotel units) is such a great boon to all the other remaining hotels (in the city)--as long as this trend continues."