Hotel filings surge as Mayor de Blasio pushes restrictive approval proposal

By Atticus O’Brien-Pappalardo

In a time of hotel foreclosures, closures and note sales, some of the biggest developers and landlords in the city, like Sam Chang’s McSam Hotel Group, Gary Barnett’s Extell Development, and Jeff Sutton are planning to build more, but why?

The hotel industry was among the hardest hit by the Covid-19 pandemic, with some reports estimating roughly one third of the city’s hotel rooms closed, yet last month four developers filed plans for a total of nearly 2,350 new hotel rooms in Manhattan and Queens.

For context, PincusCo looked at all hotel (R-1) new building plans filed in the city in 2020. Those plans called for a total of 2,272 units. It is important to note that some R-1 plans were dormitories or shelters, meaning the number of hotel rooms was likely slightly less than that total.

Insiders said the flurry of plans were likely a response to a controversial proposal from Mayor Bill de Blasio and other city representatives which could greatly restrict hotel developments if legislation were approved. The proposal has not been fully ironed out, insiders said, leaving it unclear what exactly the restrictions might be.

Ira S. Nesenoff, a partner with Nesenoff & Miltenberg, LLP, who specializes in real estate transactions, said that because of the uncertainties and lack of transparency with the proposal, developers could be rushing in to file plans. In his words, “rather than dealing with a set of facts, criteria and oversight that are uncertain, they would prefer to move forward now.”

“At this point, we do not know the criteria (of the special permit) yet. We do not have a lens looking forward, it’s behind the curtain at this point. We do not know what the formulation is going to be so we can only hope that the decisions that are made are consistent with what the private sector professionals in the field, with their diligence and experience, would do but for this newly proposed special permit requirement.”

The implementation of the special permit would only allow the construction of hotels if the proposed plans went through a public land use review. The procedure is a lengthy multi-year process that includes approvals by community boards, the borough president’s office, and the City Planning Commission.

A report from the Commercial Observer stated that aside from adding millions of dollars to development costs, the timeline for the completion of hotel developments would at least double from the special permit.

Back in 2018 the City Council approved a special permit to build hotels in manufacturing zones, a process which has completely eliminated hotels in those areas since the legislation was enacted.

The Mayor hopes to have the plan approved before he leaves office later this year, so the developers who have already filed plans could be hoping to get them approved before any changes are enacted.

PincusCo is not suggesting that these plans were necessarily reactions to the proposed special permit. However, in a similar situation, a May 2020 PincusCo analysis found that several developers sped up construction plans to file prior to changes to the New York City Energy Conservation Code.

The significant hotel developments planned last month were:

1. Extell Development’s plans for a 670-key, 242,759-square-foot, mixed-use hotel building at 1710 Broadway and a 400-key, 208,962-square-foot mixed-use hotel at 201 West 54th Street in Midtown West
2. A Sam Chang affiliate’s plans for a 297-key, 108,357-square-foot hotel at 143-16 135th Avenue and a 213-key, 70,399-square-foot hotel at 144-06 135th Avenue in Jamaica, Queens
3. Atlas Hospitality’s plans for a 401-key, 135,363-square-foot hotel building at 711 Seventh Avenue in Times Square, Manhattan
4. Jeff Sutton’s Wharton Properties’ plans for a 363-key, 176,375-square-foot commercial hotel building at 25 West 34th Street in Garment District, Manhattan

There were also significant hotel plans filed in March, such as Parmod Chadha’s plans for a 98-key, 30,017-square-foot hotel at 975 Washington Avenue in Morrisania, the Bronx, and a 47-key, 14,548-square-foot hotel at 430 East 188th Street in Belmont, the Bronx.