NEW YORK—Two developers new to New York—one already a major developer and one new to the hospitality industry—were part of a recent whirlwind event marking the groundbreaking of three Cambria Suites properties in a 24-hour period.
The hotels, to carry the flag of Choice Hotels International’s upscale brand, will be located in Times Square; the Chelsea neighborhood of Manhattan; and in downtown White Plains, New York.
Both Manhattan locations are being developed by hoteliers new to the city. Concord Hospitality is developing the Times Square property and also will manage the Chelsea property for We Care Trading Company, which is a “diversified” company but is broaching hospitality for the first time.
Mark Laport, Concord’s CEO, said despite the boom in New York hotel supply, Concord is comfortable going into sub-markets where there is extremely strong occupancy.
“Our competitive set in Times Square runs at 92% while the Chelsea competitive set runs at 90%,” he said.
Robert Chun, a principal with We Care, said, “We are going with Choice because they haven’t failed us so far as far as answering all of our question and providing support.” Chun said he has been “pleasantly surprised” at what he has seen in the hotel industry.
“We are hoping this is the first of many hotels,” he said.
Finding financing
Laport said it was co-investment by Choice that helped facilitate financing for the Times Square property, with funding obtained from commercial banks.
”It is difficult in this environment to get financing,” he said. “However, rates are extremely competitive and with the right market and the right partner it has gotten easier. It is doable.”
Laport said Concord has had a good year, enjoying a revenue increase of 7% and a profit increase of 14%; and projected increases of 5% and 10%, respectively, in 2013. Concord also is developing two other Cambria Suites properties in other urban markets.
“Financing is challenging,” Chun added. “We used relationships that we have developed over time to make it work; and Choice’s investment put it over the top.”
Bill Meyer, CEO of Meyer Jabara, which is developing the White Plains hotel, said the brand’s willingness to contribute capital made it easier to attract financing in a market like New York.
“In the rest of the country it’s tough to get financing without significant amounts of equity,” he said. “And you may need to guarantee 100% of the construction loan.”
New to New York
“There has been a lot written about all the new supply coming to New York,” Laport said. “But a new study from HVS forecasts strong growth and increased demand. One intriguing thing about Cambria is that it is an underserved brand in this market.”
George Fertitta, CEO of NYC & Company—the city’s tourism office—said New York has some of the best hotels in the world.
“People definitely do come to stay in our hotels,” he said. “That’s one reason we are projecting a record 52 million visitors in 2012.”
NYC & Company had been projecting 52.4 million visitors in 2012, but Fertitta said Hurricane Sandy will reduce that number by about 400,000.
Choice weighs in
“Building three hotels in New York during this cycle shows how we are attracting some of the best developers in the business to this brand,” said Choice’s CEO Steve Joyce. “And we see Manhattan as just getting better and bigger in terms of visitor numbers and (revenue per available room).”
Joyce said the hotels were made possible at least in part by a $250-million investment fund the company has created for the Cambria Suites brand, specifically for urban markets. He said he wished the fund had had started earlier to give the brand a stronger head start.
“We helped fill the financing gaps on these projects as well as providing development expertise,” Joyce said. “Even a small slice of financing can help fill the cap stack. And we hope that these investments will cement relationships with these partners in the future.
“I came to Choice partly because of Cambria Suites,” Joyce continued. “But the brand was not in the markets I thought it should be in. We were the leader in Wisconsin, which is a wonderful place, but not where the brand needed to be at the beginning to facilitate growth.”
Michael Murphy, senior VP of Cambria Suites, said Choice sees the “comp set” for Cambria Suites as Hyatt Place, Hotel Indigo, Aloft and Hilton Garden Inn.
The three hotels under construction represent a combined investment of about $141 million, the creation of nearly 1,000 jobs and 461 hotel rooms. Further details include:
- The 196-suite, 21-story Cambria Suites Times Square will have a lobby bar fronting 46th Street and will open in 2014.
- The 135-suite, 18-story Cambria Suites Chelsea is on West 28th Street and will open in 2014.
- The 130-suite Cambria Suites White Plains on Main Street is part of a mixed-use development that will include retail and a parking garage and is expected to open in 2013. This is Cambria Suites’ first mixed use development.