4 TRENDS SHAPING NYC HOSPITALITY
http://www.bisnow.com/new-york-real-estate/2012/03/27/4-trends-shaping-nyc-hospitality
Our 275 attendees walked into Bisnow’s NY Hotel Investment Summit last Thursday at the Marriott Marquis to Creedence Clearwater Revival’s “Have You Ever Seen the Rain?” But they won’t find dark clouds in the sector. “We’ve bottomed out and the next six to nine months will definitely be an upside,” said Sonnenblick Development chairman Bob Sonnenblick, who joined us all the way from Pacific Palisades, Calif. (It’s amazing how willing people are to travel when they’ve got good news to share.)
1) LUXURY AND BOUTIQUE DEVELOPMENT
It’s a unique period for NYC hospitality, says Tribeca Associates partner Mark Gordon—we’re experiencing development that we haven’t seen in previous cycles in New York, including the construction of four- and five-star hotels, which had already happened in other markets. “A dozen have opened or are under development,” he says. Even non-traditional locations, like TriBeCa and SoHo, have seen new high-quality, independent hotels. (Like the firm’s Smyth Hotel & Residences on 85 West Broadway.)
2) BIG NAME NOT REQUIRED
And NYC has the ability to absorb new supply—we saw 15,000 new keys between 2010 and 2011, all while increasing rates, Gemini Real Estate Advisors CEO Will Obeid points out. And you don’t have to be a big name to operate here unless you’re looking for a 600-room hotel, notes the owner of the boutique GEM Hotels. “The Ace Hotel on West 29th Street nailed it,” he says. “It’s got its finger on the pulse of the market and is a great brand.” There once was a huge need for brands (and there’s always a segment crazy about hotel rewards points), but the Expedias of the world minimize the need for those brand reservation systems. “You’re your own travel agent now,” Bob says.
3) SAFETY & DIVERSIFICATION
The challenge: equity investors and lenders see safety in traditional reservation systems, which may not work for a particular hotel, Will says. Outside of NYC, according to Bob (above), you need a flag to get a reaction from lenders. (No word on how banners or coats of arms affect them.) Barriers are not high in the outer boroughs, so they’re getting more hotels than they need and the stabilization period is protracted, the panelists say. But nothing in New York is easy, Mark added. Tribeca Associates has a hotel under development on 20 W 53rd St, across from the MoMA, a mix of five-star hotel rooms and residential condos with hotel amenties. Mixed-use can be better from a lender’s perspective—they love diversification of income.
4) LONG-TERM PERSPECTIVE
Moderator extraordinaire Sonia Kaur Bain, partner at Troutman Sanders. One switch Bob’s firm has made was moving away from 25-story hotels into more low-rise developments with larger rooms—it lowers construction costs and numbers work out a lot better. And construction prices will increase for the foreseeable future. But for now, Will says he’s still getting competitive pricing as subcontractors are hanging on by their fingernails. It’s a great time to develop if you can acquire land at a reasonable price, he says, because financing is available. Keep in mind: it takes a year for design, approvals, and getting a flag on board; two or three years to build; and another two or three years to stabilize, Bob warns.
The bright-eyed and bushy-tailed crowd.
Among the audience, we snapped Eugene Nicotra and Fred Grapstein, both of whom work in hospitality for Vornado, which recently acquired a 42% interest in the Crowne Plaza. Fred tells us the firm’s wholly owned, 1,705-key Hotel Pennsylvania hosted a record 1.1 million hotel guests last year, half from overseas. Fred says he also directs a 501(c)(3) women’s college summer softball program that finished third in the country two years ago, and Gene is the proud papa of new baby boy Joey.
A big shout-out to our sponsors at Emerge212, which operates boutique office, virtual, and concept space at 1515 Broadway and 28 W 44th St. The firm’s Keith Fearon, here with Meghan Betz, tells us that two new tenants have just signed at 1515 (next door to the morning’s event): MunchNYC, a digitized restaurant club that will be offering daily deals of at least 25% off at NY’s best restaurants; and Easy Vista (formerly known as Staff & Line), which provides IT service and asset management. Learn more about our sponsor here.
Keller Augusta Partners’ Kate Keller, Humanscale’s Ellen Hains, WorkSpaces’ Mindy Williams-McElearney, Keller Augusta Partners’ Jodi Shaw, and Marcus & Millichap’s Karen Dome. Good news from the real estate recruiters Keller Augusta—architecture and construction firms are hiring again, particularly in the multifamily sector. And tonight, NYCREW (Karen is prez) is holding a seminar on building your brand in the digital age (more info here).
LOS ANGELES—Sonnenblick Development LLC has invested US$100 million during the past two years to acquire seven tracts of land on which to build luxury resorts in the United States.
The US$100 million represents all the capital raised by Sonnenblick as part of an equity fund put together “when everyone else was running away from the hotel development business,” Bob Sonnenblick, the company’s principal, said during a recent telephone interview.
The seven full-service projects are in various stages of development, Sonnenblick said. He declined to provide details about the resorts, such as location, until the properties have broken ground. He did say the resorts would be in waterfront locations with golf courses. The land was acquired in 2010 and 2011, he said in a follow-up email.
“I don’t want to say I’m building on the west side of Manhattan and then have 10 other guys looking around the west side of Manhattan,” he said. In his email, Sonnenblick said the properties would be held under such flags as Ritz-Carlton, Westin and Hyatt. His firm will hire third-parties to operate the hotels.
He also wrote the firm intends to hold the properties for the “long term.” In addition to the seven land buys, Sonnenblick said the firm is doing three more development deals on the grounds of two “major” U.S. airports. The smaller airport hotels are “3-star” projects, he added.
Los Angeles-based Sonnenblick has other hotel developments in its history. The firm also was behind the Loews Santa Monica in California; the Boca Raton Resort & Club, a Waldorf Astoria Resort in Florida; and the Ritz Carlton at Treasure Hill in Park City, Utah. Sonnenblick said his firm is again jumping into the hotel development game in an effort to get out in front of the sector’s recovery.
Opportunity in the downturn
The economic downturn provided an opportunity for Sonnenblick to go on its buying spree.
“The lowered land prices and construction costs and interest rates make a lot of these deals pencil out better than they have in the last four years,” he said. “That’s part of our industry that excites me; that and in addition to that the fact that 90% of my competition is bankrupt and shoe salesmen somewhere.”
Though terms are not as rosy as they were a few years ago during the heady days of 2007, Sonnenblick was able to secure financing for the developments. Owning the land free and clear provides some sway with the banks, he said. He did not disclose how much equity the firm is providing for the projects.
Construction financing also is available—to a certain extent, Sonnenblick said. “I don’t (consider) 55% of construction costs a great loan,” he said.
Sonnenblick believes the hotel financing environment will loosen in 2012. By the third or fourth quarter of 2012, Sonnenblick said lenders should begin to see there is little threat to them if they open up to providing loans at higher loan-to-value rates.
CMBS problems in 2012
Still, it could well be the financing market that hurts the hotel sector’s attempts at a comeback. The US$25 billion in commercial, mortgage- backed securities that mature next year might present a big problem for the industry, Sonnenblick said.
The industry will not be able to refinance that big a chunk of CMBS debt, and instead of worrying about their properties, hoteliers will begin worrying about their properties’ debt, he said. Not focusing on their hotels will cause operating performance at hotels to suffer, Sonnenblick said. “It takes your eyes off the ball.”
12 December 2011 7:44 AM By Shawn A. Turner Finance Editor Shawn@HotelNewsNow.com
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VOLUME XLIX, NUMBER 9 Your Local News Source Since 1963 SERVING DUBLIN • LIVERMORE • PLEASANTON • SUNOL THURSDAY, MARCH 1, 2012
The Livermore City Council approved a negotiating rights agreement with Sonnenblick Development LLC on a proposal to build a luxury hotel in downtown Livermore.
The council vote was unanimous, with some concerns about potential massing to be addressed in the near future.
The negotiations will provide terms for the purchase of property located at the southeast corner of Railroad Avenue and South Livermore Avenue. The site is currently occupied by SpeeDee Oil Change and a parking lot.
The property is designated as a hotel site in the Downtown Specific Plan. The developer has been involved with prior hotel projects including the Loews Santa Monica Hotel, the Waldorf Astoria Boca Raton Restort, and Le Rivage Resort & Spa in Sacramento. Proposed in Livermore is a four story, 192 room hotel with a restaurant, bar, meeting rooms, fitness center, pool and spa. The hotel will resemble a cluster of buildings.
Councilmember Laureen Turner requested a clarification on who owns the property. She also said she was concerned about the size of the structure and aesthetics, asking if the council could make changes in the proposal when it comes before it.
Eric Uranga, Assistant Community Development Director, explained that the size, type and look of the hotel would be part of the negotiation process. The terms and conditions of the agreement would come back to the council for approval.
Uranga explained that the site was previously owned by the Redevelopment Agency. It was transferred to the city earlier this year. Uranga stated, “It is in jeopardy. The ownership will be reviewed by an oversight committee, which will determine whether the land should be disposed of or if it can be held by the city.”
Councilmember Stewart Gary asked that the city take a look at all of the rooms and conference space that would be needed in the downtown. If not all of the rooms and meeting space required could not be accommodate on the proposed site, would the city need to provide a nearby parcel.
Gary also wanted the city to have a say in who would operate the hotel. He suggested that there are more boutique operators available than those listed by Sonnenblick. “Let’s go fishing,” he stated.
Councilmember Bob Woener also wanted to take a look at the massing of the proposed hotel as soon as possible. He wanted the council involved in the actual design before it had gone too far. “It is important to involve us in what it looks like,” he declared.
The negotiations are scheduled over a period of four months. That allows time for further design development and plans for a finance package to proceed. The council would have two more looks at a design before it would be finalized.
In the application, Sonnenblick writes, “Our vision is to develop a first class luxury hotel on a property that we believe is the finest site in the entire City of Livermore. Because it is also the gateway to the downtown area, it must make an architectural statement, instead of having a plain vanilla facade.”
According to Robert Sonnenblick, the hotel would draw visitors from the surrounding businesses and industries in the region, including the wine industry. Proposed are street level retail and/or restaurant space. The five potential operators for the Livermore hotel are Hilton, Marriott, Intercontinental Hotel Group, Hyatt and Starwood.
By Todd Leskanic Staff writer
Article from Fayobserver.com
SOUTHERN PINES – A California developer has picked a different site, near U.S. 1 and Midland Road, for a proposed retail outlet center with hotels and a golf course.
Bob Sonnenblick of Sonnenblick Development said he is no longer interested in a 114-acre property on Morganton Road that he had previously discussed.
His new focus for a 335,000-square-foot outlet center, three high-end hotels and a golf course is 550 acres near the Pine Needles Lodge & Golf Club. The same site was previously proposed for the controversial 800-home Pine Needles Village development, which the Southern Pines Town Council voted down in 2008.
“The U.S. 1 site has a huge amount of highway frontage and visibility and much better access than the other properties we looked at,” Sonnenblick said. “So we’re really thrilled to have finally landed in the right spot within the Pinehurst-Southern Pines marketplace.”
Sonnenblick said potential tenants also were uncomfortable with traffic issues at the Morganton Road site and feared that high infrastructure costs would drive up rents at the outlet center.
An outlet center would be the first of its kind in the Cape Fear region. The closest centers for outlet shoppers are in Smithfield, Charlotte, Burlington, the Triangle and Myrtle Beach, S.C.
No property has changed hands. The 550 acres are owned by the Bell family, who own Pine Needles and the Mid Pines Inn & Golf Club, which is across Midland Road.
Kelly Miller, president of the resorts, said the family has acquired a bulk of the property since the late 1980s.
“We knew we were going to develop this acreage somehow or other,” Miller said. “We had attempted to to do this with Pine Needles Village several years ago, so now we think it makes sense to master plan the entire tract and move forward.”
Sonnenblick said the outlet center would be built first. He said he plans to bring in four-star hotel brands for the 300-room hotels, and he described the golf course as “championship high-end.” Roughly 100 acres would be kept vacant for wetlands and include a horse trail, he said.
The goal is to have the outlet center open in time for the 2014 U.S. Open Championship and U.S. Women’s Open Championship.
Sonnenblick was in Moore County for three days last week and met with officials from Southern Pines and the county to discuss the proposal.
“We got very positive feedback,” he said. “The reason for that is we’re going to create in excess of 1,000 jobs and millions of dollars of sales and bed tax from a property that is now vacant.”
Staff writer Todd Leskanic can be reached at leskanict@fayobserver.com or 486-3511.
Europe’s banks are going to be forced into selling more distressed property loans in the coming year as borrowers default, a major Bloomberg real estate summit in New York was told this week.
“There’s going to be a feeding frenzy soon” for European loans, said Robert Blumenthal, a managing director at Deutsche Bank Securities Inc. “Someone’s going to have to take those loans out at a significant discount” and inject “huge amounts of equity” to recapitalise the assets.
European lenders have 151.4 billion euros ($204.8 billion) of commercial real estate loans in default, compared with $121 billion at U.S. banks, according to New York- based data provider Trepp LLC, and the hotel and resort sector is a major risk.
The first quarter of 2012 is going to be “grim” the conference heard, and because the CMBS market isn’t coming back fast enough to help borrowers refinance debt coming due, there will be a “huge increase” in U.S. hotel foreclosures next year, said Robert Sonnenblick, a hotel developer.
About $21.7 billion in CMBS (Commercial Backed Mortgage Securities) loans on 232 hotels are coming due in the next 12 months and need to be refinanced, according to Realpoint, a securities ratings firm now owned by Morningstar Inc. At best, a third of that will be refinanced, with many properties being taken over by lenders, Sonnenblick said.
Private-equity firms and real estate companies over the past six months have been staffing up in London in anticipation of bidding for distressed debt in Europe, said Glenn Rufrano, president and CEO of Cushman & Wakefield.
