Classic Waldorf Hotel to Be Gutted, Up to 1,100 Rooms Turned Into Condos
June 26 2016 - 9:30PM
Dow Jones News
The Chinese acquirer of the Waldorf Astoria is finalizing plans
for an extensive overhaul that would shut the landmark New York
hotel for up to three years and convert as many as three-quarters
of its rooms into private apartments, people familiar with the
matter said.
Anbang Insurance Group Co.'s restoration plan calls for closing
down the 1,413-room property in the spring, removing as many as
1,100 hotel rooms and eliminating hundreds of hotel jobs, the
people said.
When the Waldorf reopens, the hotel will feature between 300 and
500 guest rooms upgraded to luxury standards, the people said. The
remaining units will be sold as condominiums.
The vast reduction in Waldorf hotel rooms will lead to the
elimination of many room-service, housekeeping and other
hospitality jobs. The Waldorf has about 1,500 hotel employees. The
new owners and Hilton Worldwide Holdings Inc., which will continue
to manage the property when it reopens, have reached severance
agreements with hundreds of these workers at a cost of $100 million
or more, some of the people familiar with the matter said.
The insurer plans to meet with Waldorf representatives during
the next couple of weeks to finalize its proposal for the property,
some of the people said. "We continue to explore all options," an
Anbang spokesman said. "We have no definitive plans at this
time."
The redevelopment costs are expected to run to more than $1
billion, said people familiar with the plan. Anbang already spent
$1.95 billion to acquire the property last year, the steepest price
tag ever for a U.S. hotel.
The changes will radically transform an 85-year-old institution
that has played a storied role in American political and cultural
life. Occupying a full city block on Park Avenue, the Waldorf
gained world-wide attention for its luxury suites, lavish parties
and famous guests. Every president since Herbert Hoover has stayed
there, and it has been a New York home to celebrities such as Gen.
Douglas MacArthur, Frank Sinatra, and the Duke of Windsor after he
abdicated his throne to marry American socialite Wallis
Simpson.
Hotelier Conrad Hilton, who acquired control of the property in
1949, once scribbled on a photo of the hotel that it was "The
Greatest Of Them All."
More recently, the hotel has struggled to live up to its
history, and some guests and hoteliers say an upgrade is long
overdue. The suites in the Waldorf's tower building have their
fans, but complaints about the hotel's standard rooms are
common.
President Barack Obama, who has previously stayed at the
Waldorf, bypassed it for another hotel during a visit last year to
Manhattan for the United Nations General Assembly. While the White
House didn't offer a specific reason for the change, people
familiar with the matter pointed to possible security concerns
under Anbang's ownership.
Anbang has shared little publicly about its plans for the
Waldorf and has mostly avoided press attention since its failed
takeover effort for Starwood Hotels & Resorts Worldwide Inc.
Marriott International Inc. acquired the rival lodging company
after Anbang walked away from its $14 billion offer for Starwood
citing "various market considerations."
Anbang Chairman Xiaohui Wu previously hinted at his company's
vision for the Waldorf Astoria early last year when speaking before
an audience at Harvard University. He said he planned to convert
hotel rooms to condos and suggested that there would be an element
of exclusivity.
"A potential buyer needs more than money to qualify for our
apartments," he boasted to the Ivy League crowd.
Condo conversions of historic New York hotels have become
increasingly common over the years, with developers finding that
high-end residential sales often pay better than being a
hotelier.
Morgan Stanley hotel analyst Thomas Allen wrote in 2014, when
Hilton still owned the Waldorf, that based on sales at other luxury
Manhattan condo buildings, a conversion of the historic hotel could
help raise $4 billion in condo sales under a best-case
scenario.
But Manhattan's high-end condo market has been under pressure
over the past year, with prices falling and days on the market
rising. The number of contracts signed for units at $4 million or
more during the first 25 weeks of this year fell 22% compared with
the period last year, according to luxury broker Olshan Realty
Inc.
"There's just too much inventory that's overpriced," said Donna
Olshan, the firm's president. "We're past the peak."
A previous owner of New York's Plaza Hotel battled the hotel
union and preservationists when he converted hundreds of rooms to
condos about a decade ago. After a sales slump following the
financial crisis eased, some Plaza condos have sold for tens of
millions of dollars.
When speaking at Harvard last year, Mr. Wu floated a Waldorf
perk for those who wanted to join his company. "If you become an
employee of Anbang, you will be entitled to a free dinner and a
free room night when you get married," he said.
Write to Craig Karmin at craig.karmin@wsj.com
(END) Dow Jones Newswires
June 26, 2016 21:15 ET (01:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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