New York City’s hotel industry is a tough nut to crack – even for heirs of the Hyatt Hotels empire.
Billionaire John Pritzker’s tommie hotels – a millennial-focused brand that announced plans to tap the Manhattan market in 2013 – has been terminated from its two New York City projects, developers told The Real Deal.
The San Francisco-based brand is owned by Commune Hotels & Resorts, a hotel company chaired by Pritzker. Commune was formed in 2011, when Thompson Hotels merged with Joie de Vivre Hospitality, which Pritzker’s private equity firm Geolo Capital acquired in 2010.
In New York, tommie was set to operate Simon Baron Development’s 250-room hotel at 11 East 31st Street in NoMad, a joint venture with London-based equity partner Quadrum Global, KSNY’s Keith Schwebel and Eagle Point Hotel Partners, a New York-based hotel investment company.
Tommie was also set to operate a 325-room hotel in Hudson Square located at 231 Hudson Street, otherwise known as 503 Canal Street, that is being developed by Quadrum and Eagle Point. Instead, Quadrum will now self-manage both hotels, according to Seth Schumer, Quadrum’s director of U.S. investments.
“The hotels [have] taken a very long time to open,” he told TRD. The pair of tommie hotels were initially set to open by December 2014, he said, and the delay enabled Quadrum to buy out Commune in March by paying an undisclosed termination fee.
According to Schumer, Quadrum always wanted to run the hotels in-house, but did not have the resources to do so when it inked a deal with Commune in 2012.
At the time, Pritzker was also an investor in 11 East 31st Street, which Simon Baron purchased before the 2008 financial crisis. Schumer said Pritzker sold his interest in the project for roughly $13 million, and in exchange, the developers agreed to fly the tommie flag. (Pritzker never had equity in the Hudson Square hotel.)
In a statement, Commune said it “mutually agreed” with the developers to terminate the management agreements. “Commune is pursuing tommie management contracts and investment opportunities globally. Other locations slated for tommie hotels include Los Angeles, Austin, New Orleans, and Chicago,” the statement said. A spokeswoman said Commune had other, non-tommie concepts in the works in New York, including The Beekman, set to open in Lower Manhattan this summer, and Hotel 50 Bowery, which is set to open in Chinatown this fall.
For Simon Baron, the shake-up is the latest hurdle that developers Matt Baron and Jonathan Simon have faced at 11 East 31st, a site they bought for about $27 million nearly a decade ago. The project stalled during the recession and over the years several joint venture partners have joined, and left.
In 2015, the hotel’s construction financing fell through after regulators shut down Puerto Rico-based Doral Bank, which provided the developers a $40 million loan in 2013. That’s when Quadrum stepped in, and in 2015, the developers obtained a new mortgage from Cybus Lending Corp. Ltd., a Cayman Islands-based institution, city records show.
Representatives from Simon Baron didn’t respond to requests for comment.
At the Hudson Square site, Eagle Point acquired the lease for the development site from Sam Chang’s McSam Group for just under $50 million in 2013. The development parcel is owned by Ponte Equities.