West Side hotel developers are in the zone Hudson Yards incentives create building cluster along W39th St

Real Estate Weekly,  Sept 5, 2007  by Danielle Wolffe

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Tourists may soon have a reason to step beyond the fluorescent commercial nexus of the "new Times Square," a place to stow the Ann Taylor bags and origami cranes and cartoon drawings they purchased on the streets; to let the hot dogs they scarfed down digest and take a break from the barrage of people surging into the Disney store and Ripleys wax museum. Developers drawn to the

Times Square neighborhood both by the influx of visitors, zoning incentives offered by Hudson Yards, and private financing, are beginning to snatch up the parking lots and ruined businesses marking the still largely undeveloped streets on the other side of Eighth Avenue as potential hotel sites.

Nowhere is the phenomenon more obvious than on West 39th Street, between 8th and 9th Avenues, where at least 11 high-rise hotels are currently under construction.

"This is a block that was once somewhat forlorn. It was not a block that people would choose to walk down and in many cases might feel uncertain about walking down because they don't know the neighborhood. Now it's going to be completely transformed into a block which is going to be a showcase about what New York offers to visitors," said Gene Kaufman, principal of Gene Kaufman Architect PC who is designing eight of the new hotels.

The hotels are all part of larger flags and include six properties owned by McSam Hotel Group LLC, including the Hampton Inn and Kenwood Suites; the Lam Group's Marriot Fairfield and Sheraton Four Points; and the MEHTA Family LLC's Staybridg Suites. With the exception of one 56room hotel that has not yet been branded, the majority of the hotels on the street will rise between 31 and 36 stories. In the area adjacent to the Port Authority Bus Terminal where the majority of buildings are just a few stories, this height is intended to give residents a different perspective.

The hotels heights are not the only features which give guests a different perspective. Architects took advantage of the buildings proximity to Times Square to create designs not normally seen in flagship hotels.

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"We tried to make the buildings have a great deal of visual interest. The focal point of the area is Times Square. There are established hotels in the area, such as the Westin on 42nd street, which are visually very ambitious, very colorful and very clearly not the norm for traditional hotel building. Our intention was to contribute to this kind of vocabulary, to make buildings that were not as jazzy as Tunes Square itself, but are more visually inventive than we might do in Chelsea for instance."

Some of the buildings more extraordinary features include a custom made fire engine red brick glaze for the Marriot Fairfield, black glazed brick on the Sheraton Four points, rooftop outdoor bars offering 360 degree views of the city, and computer controlled colored lights on the facade of the building that reflect the bricks surface.

The cluster of hotels will change the neighborhood in other, less obvious ways. The Hudson Yards bylaws require anyone building in the neighborhood to create a 400 s/f facility for people to stow their bicycles. Each bike room--which will cost upwards of $100,000 dollars to build and maintain--could hold about 50 bikes. Five of the sites required the removal of significant amounts of parking space to build.

"The assumption is that now there is going to be an increased demand for parking that will be met somewhere else. But the potential is there for about a third of the guests of each hotel to travel by bike," Kaufman said.

Hotel rooms for most of the properties should range between $200-$400-mid level market rate in Manhattan. The hotel owners have no problems securing those rates, as New York hotel room occupancy has been at 85% for the past two years, according to a report published by Smith Travel Research.

"To get an average 85% rate of occupancy, you have a shortage of rooms most of the time. To get to 85%, it means you would have to be sold out most nights," said Gary Wisinski, chief operating officer of McSam Hotels, LTD, a prolific hotel development company that is building six of the 39th street properties.

"There is a latent demand for hotel rooms in New York that is not accommodated. That is why we keep building hotels in the city," Wisinski said.

In the case of 39th street, developers took advantage of zoning laws that were changed in 2005 to accommodate Hudson Yards, a development expanse between 28-43rd streets, from 8th Avenue to the Hudson River, a portion of which was built over former railroad yards. The zoning allows a greater density on the block, but will only allow 16% residential use in a building.

Financing is also more readily available for hotels now than it was in the past, when lenders were more apt to consider hotels a risk, Kaufman said. The exchange rate, which is prompting more Europeans to travel to the states, international hotel developers more willing to take on hotels in the US, and pioneers like McSam taking on proper ties in areas previously considered risky, helped make building hotels in the city more viable, Kaufman explained.