Bankrupt Hotel and Migrant Shelter Pivots to For-Profit Student Dorm
In the Financial District, what was once the world’s tallest Holiday Inn hotel is slated to be repurposed as a new kind of college dormitory. The building at 99 Washington Street has been purchased for an undisclosed price by Hawkins Way Capital, a California-based real estate developer, with plans to renovate and repurpose the tower under its Found Study brand, which operates for-profit “student and intern housing” in major cities around the nation, near college campuses.
The former Holiday Inn went into foreclosure and bankruptcy proceedings multiple times during the Covid pandemic, before being bailed out by the Adams administration with a contract that paid more than $90,000 per day (or more than $34 million per year) to house immigrants who were newly arrived in the United States, but had been forcibly expelled from states such as Florida and Texas.
Hawkins Way and Found Study plan to convert former hotel amenity areas at 99 Washington into shared spaces, including communal kitchens and dining areas, laundry rooms, lounges, study spaces, and a fitness center. The 492 rooms in the building will be reconfigured into spaces ranging from 175 to 200 square feet, priced for the fall semester at $1,449 (per person, for two persons in a room) to $2,250 per month (for one person in a private room). These prices include utilities.
“This acquisition reflects Hawkins Way’s focus on investing in out-of-favor assets feeling post Covid-19 effects with strong potential,” said Joshua Bird, the managing director and general counsel at Hawkins Way, in a statement. “Located in the heart of Manhattan’s Financial District, the property offers substantial opportunity, and we look forward to strategically repositioning it.”
The cost structure for Found Study housing appears to be especially lucrative. According to the online real estate database RentHop, the monthly rental price per square foot for studio apartments in Manhattan is currently $8.28. But Found Study’s price of $2,898 (the total paid by two people in a 200-square-foot unit) works out to $14.49 per square foot, a premium of roughly 75 percent over the prevailing market value. This gap widens further when considering that all apartments (including studios) are legally required to contain a kitchen with a stove and refrigerator (and are thus more valuable), while Found Study rooms do not.
Another aspect of this plan that may appeal to real estate investors and property developers is that dormitory facilities are legally classified as “Class B” transient dwellings under New York law. This category confers far fewer rights on tenants than “Class A” dwellings, such as traditional apartment buildings. In particular, residents of Class B dwellings are far easier to evict than those who reside in Class A rentals.
This distinction was highlighted in 2023 bankruptcy litigation over the former Holiday Inn hotel at 99 Washington Street, when creditors were seeking to prevent the hotel owner from signing a contract with the City to operate a migrant shelter. In court papers, the lenders argued, “the extended stays of the asylum seekers could turn them into residents instead of guests. That would entitle them to eviction-prevention rights that transient hotel guests lack. Subjecting lenders to the risk of involuntary tenancies of insolvent tenants with heightened eviction protections is an unfair exposure.”
Operating the former Holiday Inn as a student dormitory appears to resolve this issue in a way that many residential property owners in New York (where courts are perceived to favor tenants) may find enticing.
Nationally, the private equity industry has poured tens of billions of dollars into acquiring portfolios of student housing developments in recent years, as these facilities have shifted from the traditional model of being owned and operated by universities to a privatized form of for-profit ownership.
Locally, Found Study already operates five dormitory facilities in Manhattan, plus two more in Brooklyn (all in former hotels), in addition to student housing in half a dozen cities nationwide.