A hotel developer seeking to repeat a 2017 coup may face headwinds that could work against such a reprise. Last December, Hidrock Properties, a Manhattan-based builder of hotels and office properties, completed demolition of two small buildings at 110 and 112 Liberty Street, between Greenwich Street and Trinity Place, which it bought for $38 million in 2018. (Local residents may remember them as the home of the Ho-Yip and Essex World restaurants.)
Since then, there has been no visible activity at the site, even though several months passed between the end of work in tearing down the original structures and the onset of the “pause” order (triggered by the pandemic coronavirus) that brought most business activity throughout the City to a halt in March.
Hidrock was likely inspired to acquire the Liberty Street parcel by the frenetic pace of local tourism (some 14 million visitors came to Lower Manhattan in 2019, according to the Downtown Alliance) and its own recent experience in local hotel development.
In 2007, the firm paid $28 million for a site at 133 Greenwich Street, in the Financial District, where it built a Courtyard by Marriott Hotel. Just as this structure was completed, it sold the property to Union Investment Real Estate GmbH (the property arm of Germany’s DZ Bank Group), which paid Hidrock $206 million for the hotel.
But two tidal shifts in the market may augur ill for Hidrock’s plan. First, local travel and tourism have ground to a halt in the wake of the pandemic coronavirus. When the total number of visitors to Lower Manhattan in 2020 is tallied, it is likely to be a fraction of the headcount in recent years.
Second, by any reasonable yardstick, the hotel sector in Lower Manhattan has been drastically overbuilt — the result of nearly two decades of giddy speculation by developers, such a Hidrock.
In the years leading up to the terrorist attacks of September 11, 2001, visitors wishing to stay in Lower Manhattan had essentially three choices: the Marriott World Trade Center Hotel (destroyed when the Twin Towers collapsed), the Marriott World Financial Center Hotel (now known as the Marriott Downtown, on West Street), and the Millennium Hilton Downtown Hotel (on Church Street, opposite the World Trade Center complex).
Today, there are 37 hotels operating in the square mile below Chambers Street, offering more than 7,900 rooms, according to the 2019 Lower Manhattan Real Estate Year in Review, a report from the Downtown Alliance. The same analysis indicates that another 15 hotels, containing an additional 2,000 rooms, are currently under construction or in the planning stages. That represents more than one-fourth of the 56 hotels currently being built or planned in all of Manhattan.
Even before the national and local economies stalled, as a result of quarantine measures, the hotel business in Lower Manhattan had begun to show signs of impending trouble. The Ritz-Carlton Battery Park (at Two West Street) opened to much fanfare in 2002, but was never able to turn a profit. Sold to a new operator in 2018, its name was changed to the Wagner. (The current owner is hoping to exit the hotel business entirely, by seeking permission to convert the structure into apartments.)
More recently, the Andaz Hotel (at 75 Wall Street) was put up for sale by its owner, the Hakimian Organization. The building is being shopped to developers based not on its value as a hotel, but instead for its potential to convert into office or residential use.
But all of the harbingers came before every hotel in Lower Manhattan (and most throughout New York City) was shut down as part of the social distancing measures that aim to limit the spread of the coronavirus. In the weeks that followed, many local hotels were commandeered for other uses: the City began using the Radisson New York Wall Street Hotel (located at the corner of William and Pine Streets) to house homeless people quarantined because of possible exposure to the disease. And the Conrad Hotel in Battery Park City (located in Battery Park City, at 102 North End Avenue) was repurposed to house healthcare personnel who volunteered to come to New York and aid in the fight against the pandemic.
Even after the health crisis recedes, however, a significant (and prolonged) financial downturn is widely expected to follow. If this contraction jolts the hospitality industry as similar episodes have in decades past, at least some of the dozens of hotels recently built in Lower Manhattan may not reopen their doors. And other, currently under construction, may never welcome their first guests.
What might become of these structures remains unclear. It is possible (although expensive) to convert hotels into apartment buildings, but a twin glut of residential development is also cresting in Lower Manhattan at the same time. It appears likely, however, that such a transformation will alter the local streetscape in ways that are both significant and hard to predict.
But such a crisis may also create opportunity, for community leaders who have long bemoaned the critical shortage of affordable housing in Lower Manhattan. If even a significant fraction of the Downtown’s hotel inventory were to be adapted for residential use, this process would likely create a thousand or more new apartments. A campaign to enact incentives for developers to set aside at least some of these units as affordable dwellings could mitigate some of pricing pressure suffered by longtime residents in recent years.
In the meantime, however, Hidrock is pressing ahead with its plan. Newly released renderings of the project at 112 Liberty Street depict a 30-story hotel containing more than 200 rooms.
Matthew Fenton
