The Real Deal New York

Hotel Chelsea renovation drags on

New owners continue to struggle with delays and cost overruns

June 24, 2015 09:04AM

222 West 23rd Street in Chelsea

222 West 23rd Street in Chelsea

Since a new group of owners took control of the Hotel Chelsea from the Chetrit Group in 2013 amidst disputes Chetrit had suffered with the rent-stabilized tenants, the struggles to renovate the historic building to a luxury hotel have not ceased.

The group in control, which includes Pershing Square Capital’s Bill Ackman, Leucadia National Corp. chairman Joseph Steinberg and Wheelock Street Capital, has already spent $185 million to acquire and begin converting the property to 120 hotel rooms.

The hotel is not expected to open before 2017, according to the Wall Street Journal, as the renovation is running at least a year behind schedule.

Eastdil Secured has been hired to help refinance their debt, bring in a new equity partner, and borrow more money.

The complications of repairing the ramshackle 1884 building are being compounded by the difficulties of dealing with rent-stabilized tenants, who are being put up in nearby hotels and given daily food stipends in some cases. Entire floors of the building are not able to be closed at once.

“That combination makes for a project that is more expensive than the typical renovation, and perhaps more than they may have first realized,” said Sean Hennessey, CEO of Lodging Advisors, a hotel consulting firm.

Chetrit dissolved its partnership with co-owner, Ed Scheetz’s Chelsea Hotels, in 2013. [WSJ] — Tess Hofmann