Hostel Takeover

The company that owns the hotel portion of what was the Ritz-Carlton building in southern Battery Park City has stripped the luxury brand name from its hostelry, apparently as part of its ongoing campaign to shut down the lodging facility and convert it to condominium apartments. As of Wednesday night, work crews began removing the Ritz-Carlton flags and signage from the building’s exterior, and employees began answering the phone using a new name: “the Wagner Hotel at the Battery.”

The Wagner Hotel (apparently named for the adjacent Wagner Park) is owned by real estate developer Westbrook Partners, which purchased the Ritz-Carlton Hotel in 2014. To manage the facility, Westbrook has hired Highgate, a firm that describes itself as, “an industry-leading investor and manager of hospitality assets,” and, “the dominant hotel player in key gateway markets, such as New York.” Indeed, the firm’s website goes on to claim that the company manages ten percent of Manhattan entire inventory of hotel rooms. Highgate operates more than 20 hotels in Manhattan (including the Royalton, Paramount, Park Lane, and Park Central hotels) with more than 10,000 rooms.

The 38-story building at the foot of Battery Place in which Highgate is managing the rebranded Wagner is divided between a 298-room hotel, which occupies the first 12 floors the structure, and a 120-unit condominium, which fills the upper 26 floors. The building was originally constructed by developer Millennium Partners. The hotel was originally scheduled to open days after the terrorist attacks of September 11, 2001, but did not launch until the following year. Although widely lauded for its high quality of accommodations and service, the Ritz-Carlton struggled financially in the years that followed, with the 2008 real estate downtown and 2012’s Hurricane Sandy further clouding its business prospects. In 2013, Millennium sold their interest in the hotel to Westbrook Partners.

An announcement by the board of managers for the condominium portion of the Ritz-Carlton was circulated to residents on in November, advising them that, “Westbrook Partners, the owner of the Ritz-Carlton Hotel Battery Park… intend to terminate their management agreement with the Ritz-Carlton Hotel Company and to retain an alternative management company for the Hotel. (Simply put, we understand that if their plan is implemented, the Hotel will no longer be a Ritz-Carlton Hotel). The Westbrook representatives have not disclosed to us the name of the alternative hotel management company they hope to retain. They claim that they are not seeking to amend the ground lease which, inter alia, requires the Hotel to be operated as a ‘first class hotel.'”

The assertion attributed to Westbrook, that they are not seeking to alter their ground lease, is contradicted by 2014 Battery Park City Authority (BPCA) documents reviewed by the Broadsheet. A memorandum from then-BPCA president Shari Hyman to Authority board members recounts, “we discussed in executive session the desire of Westbrook Partners, LLC and its partners to convert the Ritz-Carlton Battery Park City to a residential condominium. According to Westbrook, the Hotel was underperforming and operating at a significant loss. Specifically, since 2007, occupancy and average room rates have steadily declined as a result of increased competition, the recession, and the Hotel’s structure/star rating.”

“Westbrook has attempted to find other hotel operators to supplant the Ritz and has considered alternatives including operating a smaller hotel with some residential units, but they have been unsuccessful in getting any interest from other operators,” the memorandum continues. “Westbrook has mitigated their losses over the past year or so — from $10 million per year to $6 million per year — but they do not believe it will ever be profitable as a hotel.”

The document also notes that, “in order to move forward with the proposed 100 percent residential condominium conversion, Westbrook must amend its existing lease with the Authority to allow for the proposed conversion. Any vote by the Authority to approve any such amendments to the lease would likely best occur after Westbrook obtains consent from the Board for such conversion, and after any questions concerning use of the common elements are resolved. Westbrook, however, sought an indication from the Authority that such conversion will be approved subject to any conditions the Authority wishes to impose prior to Westbrook’s approach to their Board. This request was denied.”

While such a refusal does necessarily not mean that the BPCA will never approve a conversion, it does mean that the Authority has declined to provide any assurance in advance that it will agree to such a plan.

Even as it was seeking cooperation from the BPCA to convert the hotel portion of the building into residential condominiums, Westbrook was also trying to sell its interest. Marketing materials compiled by brokerage Eastdil Secured in 2015 enthuse that, “investors will potentially have the opportunity to convert a portion of the Hotel into residential condominiums.” The same promotional material notes that, “the offering includes an adjacent parcel of land immediately to the south of the Property that could potentially be developed into an additional hotel or residential tower.” This appears to be a reference to the public plaza adjoining the Ritz-Carlton building, an amenity that was created in exchange for allowing the original developers to build higher. Any suggestion that this public space could be developed into another building is almost certainly false.

But residents of the Ritz-Carlton condominiums have other concerns that may be more substantive. They paid a premium for apartments located within a building that houses a luxury hotel, branded to a world-renowned chain. The removal of the Ritz nameplate from their building may negatively affect the value of their apartments. The pending closure of the hotel would also deprive them of an amenity that many prize: the availability of hotel services within their apartment building. More ominously, the sudden sale of more than 100 additional, newly renovated apartments in the same building will likely exert serious downward pressure on the resale price of their own homes. And the year or more of construction required to demolish almost 300 hotel rooms and convert them into residential apartments (along with the dust and noise associated with such a project) might seriously diminish their standard of living.

And there may be impacts for nearby residents, as well. The effect of more than 100 new households on local schools (and other forms of civic infrastructure) could worsen crowding conditions that many believe have begun to detract from Lower Manhattan’s quality of life.

In September, 2015, a group of concerned homeowners within the Ritz tower brought these concerns to Community Board 1 (CB1), which passed a resolution urging the BPCA to, “give full consideration to the current residents, consider the effect of an increased residential population on the infrastructure and services in the area, weigh the effects of not having the anchor hotel in our community,” while also calling upon elected officials to work with the BPCA to resolve the issue in a manner, “supportive of the tenants and the community.”

The same resolution also urged that, “there should not be any further changes to the ground lease.” If such a provision were to be honored, it would not be legally possible for Westbrook to convert the hotel space within the Ritz building to new apartments.

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