For years, as developer Sam Chang dotted the city with 25 hotels, he remained under the radar, and that’s just the way he liked it.
But success has a price. Now that Chang has put up projects in all five boroughs (see chart) and refined his ability to build hotels citywide, his name and fame have grown to the point where privacy is harder to preserve.
The pace and geographic scope of Chang’s projects are dizzying. Christyne Nicholas, the city’s tourism czar, estimated that Chang is building 3,000 out of the 5,000 rooms under construction in the city. An analysis by The Real Deal that looked at Chang’s longer-term plans through 2008 found even more units in the pipeline — some 5,900 units out of approximately 13,000 units planned in the city. His goal, he said, is to build 50 hotels.
“My first five or six years in business, I tried to avoid giving interviews, but lately people want to know what I’m doing, so I’m getting too big to hide,” he said. “If I don’t talk to reporters, they’re just going to write whatever they want.”
He’s found the spotlight a little bright at times. Forbes Asia and the Village Voice mentioned labor battles at his job sites, one of which, in Chelsea, ended with the arrests of both union protestors and security guards at the site. The Staten Island Advance raised questions about Chang’s ability to build a hotel on a site with significant wetlands considerations. Word about community opposition to an after-hours bistro set to occupy his new Holiday Inn Express near Hudson Avenue in the Gowanus section of Brooklyn made the front page of the Brooklyn Paper, a local weekly newspaper. (For more about Chang’s activity in the outer boroughs, see Heading beyond Manhattan for the night).
Chang said he has struck a deal with the unions, he is able to build on his parcel in Staten Island, and the restaurant situation does not affect the hotel’s certain future.
Born in Taiwan, Chang, 45, helped his parents manage a hotel in Los Angeles. During a cross-country trip, he emerged from the Lincoln Tunnel and vowed to own a piece of Manhattan. He was the first developer to build a hotel near the Javits Center, not due to market savvy, but “at the time, I didn’t have enough money to buy a prime piece of Midtown land,” he said. “I was able to pick up the first piece for $500,000,” although the hotel has proven to be one of his worst performers, he said.
In 1996, Chang set up shop in Queens and moved to Floral Park in Nassau County. He recently rented larger office space in Great Neck for his development operation, which has a name that reveals a whimsical side.
Here’s his explanation for the name McSam Hotel Group: “I like to have fun with the names of my corporations. McSam means ‘me Sam,’ so it’s just a way to introduce myself — ‘My name is Sam.’ At a party once, I sang the only song I ever sing, ‘House of the Rising Sun,’ so two days later, I was talking with someone who had been at the party about a name for a company and he said ‘how about we use Rising Sun?’ so we did.”
He’s managed to acquire land in fringe areas around Times Square, the Garment District, the greater Flatiron area and even lower Manhattan. He started by building no-frills, mid-sized, budget and limited-service hotels for national chains. He brought Comfort Inn and Holiday Inn Express to Manhattan at a time when upscale boutique hotels outdid themselves to offer style and upscale amenities.
“New York City had been composed of full-service hotels; there had not been a significant number of the newer generation of limited-service hotels, so he saw an opportunity to build on an economically efficient basis and acquire the land at attractive prices,” said Mark Gordon, principal managing director of the international lodging group at real estate investment bank Sonnenblick-Goldman, who helped finance Chang’s Chelsea Holiday Inn Express.
Chang benefited from the solid rebound in the hotel market after Sept. 11, 2001.
“He had the foresight to see that as the market improved, his locations that were considered to be out of favor at the time would improve as well. He had the courage and conviction to stick to a business plan, proving that sometimes you can make the most money on a contrarian play,” said Gordon. “But he’s an entrepreneurial dynamo who knows his way around the system and has built a hotel development machine, yet he’s very modest and most people don’t really know who he is.”
His chosen locations may not make his hotels the center of New York nightlife, but that’s not what Chang is about, said Dennis W. Russo, a partner at Herrick, Feinstein who represented a party involved with the Chelsea Holiday Inn deal.
“Most hotel companies hire specialized firms that charge big fees, but Chang can package the whole deal,” he said. “He realized that the people from Middle America who visit New York don’t want to stay in the Meatpacking District. There’s a huge need for new hotel rooms and Sam is supplying them.”
Just as Chang took a risk in marginal Manhattan properties, he has spread into the outer boroughs, undertaking projects in Queens around Kennedy Airport and Flushing. He said that his Holiday Inn Express near the Gowanus Canal in Brooklyn is “the best performing Holiday Inn Express outside Manhattan.” It runs at 80 percent occupancy at an average daily room rate of $200. “How can you beat that in Brooklyn?”
Chang also moved into the Bronx and Staten Island.
At first, he sold his completed buildings outright, but he said he has begun to manage some properties, such as the Holiday Inn Express in Chelsea, mainly for the cash flow.
“I’m also starting to get into more prime areas,” he said. “I own a place on Lexington and 48th Street across from the Waldorf and places in Union Square. I own land near Rector and Trinity, a prime location. Things are getting bigger, and I would have bought more prime real estate, but at the time I didn’t have the money.”
Though he works almost nonstop, Chang is already considering his future. “Right now, people are starting to copy what I’ve done,” he said. “Some of my old subcontractors bought a hotel and went to my architect to try and copy what I do. I will probably go for three more years and then stop.”
This will not happen, though, until he builds 50 hotels in the city. “That’s got to be the record. I don’t think anyone else will ever duplicate that. To build 50 hotels in New York is something I’m proud of.”