To the editor:
I was very confused by the article below regarding the ‘Flip this Hotel’
(BroadsheetDAILY March 1). You stated Hidrock paid $28 million for the property, which was only the land. You fail to mention the fact Hidrock had to build a hotel on the land and the cost of building the hotel adds to the property’s basis.
Hidrock stated when it purchased the parcel, it expected the construction of the hotel to be in the neighborhood of $70MM-$80MM – which would have put the total cost (if that was the final number) between $98MM and $100MM. I guessing closer to $100MM. The ‘profit’ on the venture isn’t $183MM – that’s absurd – it’s probably a little more than half that amount when all costs are factored in. It’s still a very healthy profit – but someone took a risk with $100MM, hoping it would be profitable.
The article was also written with a critical view of ‘flipping real estate to make money’ – isn’t that the New York City way of life? Who are you to be critical of the returns a real estate developer makes, and how it may or may not affect ‘the lives of the people who live and work here’.
It legitimate work…..and it wasn’t done dishonestly like the Rivington property which was politically manipulated, allowing the developers to profit from bias and incompetence inside the DeBlasio Administration…..that’s stealing.
Editor’s Note: Mr. Swartz makes a valid point. We omitted the cost of construction for the hotel, which multiple sources peg at $100 million. Thus, we should have said that Hidrock’s profit, after the cost of acquisition ($28 million) and construction ($100 million) and the sale of the property (for $206 million) was $78 million, plus the estimated $5.6 million for the retail space it kept. This brings the developer’s total profit on the transaction to slightly more than $83 million, which represents an overall return of 186 percent, or an annualized return of 23.41 percent. We thank Mr. Swartz for pointing out the oversight, and the story has been updated on our website to reflect these changes.