NEW YORK CITY-BCN Development CEO Craig Nassi tells GlobeSt.com that his firm is currently in the works to build a 400,000-sf hotel near the World Trade Center site. Although details are scarce at this point, with the specific site and financing information not disclosed, Nassi says it will be a five-star hotel with 200-plus condos, and groundbreaking is expected to be in early 2009.
Nassi says the hotel is expected to be complete within 36 months. He notes that “debt is at a maximum of 55% to 60% today, which makes the capital stack difficult to fill while still fulfilling your proforma.” He adds that construction costs throughout Manhattan are at a “$500-plus-per-sf to build cost, only this has to be built union which is very costly.” He expects to close within 90 days. Factoring in that $500-plus per sf, a 400,000-sf property would be approximately over $200 million, according to GlobeSt.com’s calculations, although one source put the construction cost closer to $1000. Another unidentified industry source tells GlobeSt.com that $1,000-per-buildable-sf is too high, but $500-per-sf is low. After following up with Nassi again regarding the construction costs, he again says that “hard costs are only $500-per-buildable-sf.”
Nassi says that anything near the World Trade Center is desirable because “it’s going to be the largest tourist attraction in New York City and the USA for decades to come.” He says that Costas Kondylis & Partners LLP Architects has been hired. A rendering on BCN’s website shows a proposed tower by Costas Kondylis at 111 Washington St., which is more than likely the tower’s location, although Nassi would not further confirm. Calls to Costas Kondylis were not returned by deadline.
Sumner Baye, president and partner of International Hotel Network LLC, tells GlobeSt.com that a lot of the success of hotel properties downtown depends on the WTC’s plans and how quickly it will get done, which is difficult, he explains. He adds that the location is very competitive–with Silverstein’s Four Seasons and the Ritz Carlton in the area, for example. “You have to be careful. The cost of construction is very high, so to build a hotel today from the ground-floor up is a very costly business depending on what type of hotel you are going to build,” he says.
Baye says that in order to compete with the Four Seasons hotel and the Ritz Carlton hotel, rates will have to be $500 to $1000 per night to be competitive based on constructions costs, which he notes are “probably closer to $1000 per-buildable-sf to get it done.” Baye also explains to GlobeSt.com the importance of branding in order to compete with these other hotels in the area. “The question is, who are they going to bring in to compete with these other brands in the area?”
As GlobeSt.com previously reported, hotel experts have a lot of confidence in Downtown at the moment. Swig Equities LLC recently revealed plans to construct a 62-story, luxury, mixed-use development Downtown. Also, Daniel Lesser, senior managing director of CB Richard Ellis Valuation & Advisory Services and Hospitality and Gaming Group, told GlobeSt.com last week that “hotels are experiencing strong occupancy levels and increases in room rates that exceed underlying inflation rates.” He further explained that similar to all of Manhattan, “Downtown is currently ‘under-hoteled’ with a variety of new lodging projects in various stages of development. Given the increased corporate and leisure/transient demand expected during the foreseeable future, occupancy levels should remain strong coupled with continued growth in room rates above inflationary levels.”
BCN last year purchased 315 Park Ave. South as GlobeSt.com exclusively reported. BCN was started in 1993 by Nassi and focuses mainly on creating high-end, mixed-use properties.