(Bloomberg News) Sam Nazarian, the Los Angeles restaurant and nightclub owner, plans to open an $85 million SLS Hotel in New York, the first in the city for the luxury brand.
His company, SBE Entertainment Group LLC, is teaming with New York-based Moin Development Corp. on the 190-room project at 444 Park Ave. South, at 30th Street. They will gut and add on to an existing office building to construct a 20-story hotel with a rooftop bar, according to Nazarian, chairman and chief executive officer of SBE. It would be the third SLS Hotel in the U.S. and is slated to open by mid-2013, SBE said today in a statement.
SBE, which also owns Hyde nightclubs and the Katsuya and Cleo restaurant brands, has said it wants to build SLS into a chain of boutique hotels that would attract high-end leisure and business travelers. New York City hotels had an occupancy rate of 76 percent this year through April, the third-best among the top 25 U.S. markets, behind Miami and Oahu, Hawaii, according to Smith Travel Research Inc., based in Hendersonville, Tennessee.
"New York is a high-risk, high-reward market," Patrick Scholes, a hospitality-industry analyst at research firm Suntrust Robinson Humphrey Inc. in New York, said in a telephone interview last week. "It is higher risk, based on the cost of entry but it tends to have strong demand for high-end boutique- type hotels."'Sought After'
SBE took six years to find a suitable deal in New York, Nazarian said. It competed against such companies as Hyatt Hotels Corp. and Kimpton Hotel & Restaurant Group LLC for the Park Avenue property, he said. Nazarian agreed in March to the joint venture in which Moin will own 90 percent and SBE will have the rest.
"The Park Avenue South corridor is really sought after," Nazarian said yesterday in a telephone interview. "It's a great place for boutique hotels. It reminds me of the Meatpacking District 10 years ago."
The project's $85 million cost includes construction expenses and Moin's acquisition of the real estate, according to Nazarian, whose company contributed $4 million in cash. Moin paid $45 million for the property in August, the company's president, David Moinian, said in an e-mail.
The hotel will be designed by Philippe Starck, who also worked on the SLS Hotel South Beach in Florida, SBE said in the statement.Soho, Uptown
Nazarian envisions adding SLS properties in uptown Manhattan and the Soho neighborhood and is scouting New York locations for Redbury, his new high-end, extended-stay brand.
SBE, which also operates an SLS Hotel in Beverly Hills, California, expects to make a deal this year for an SLS in Seattle, he said.
In May, SBE and Stockbridge Real Estate Funds of San Francisco obtained $300 million in funding to redevelop the landmark Sahara Hotel & Casino in Las Vegas. It is scheduled to open in 2014 as the SLS Las Vegas, Nazarian said at the time.
Expanding may prove challenging for a new brand like SLS, according to Scholes, the industry analyst.
"The hotel business is a very competitive industry where having a well-known name typically means you have a higher chance to be able to stay in business," he said. "If you're a new brand without name recognition, you'll have to spend a lot of money to be successful."