The Ritz-Carlton NoMad is slated to break a neighborhood sale price record and roll out a model that legally bypasses the city’s short-term rental restrictions.
The hotel/condo combo by Paul Kanavos’ Flag Luxury Group limits owners of the 16 penthouse units to staying 120 days out of the year and 29 days at a time in the branded luxury residences.
The arrangement means the property, at 25 West 28th Street, can maintain commercial zoning because the owners aren’t considered full-time residents. It allows the Ritz-Carlton Nomad to circumvent restrictions of the site’s manufacturing zoning, where residential use is generally not allowed.
Penthouse units at the Ritz come with lockable owners’ closets for safekeeping residents’ belongings while guests use the condos as hotel rooms. All rooms come with two room numbers, so owners can rent out one bedroom and stay in the rest of the unit with complete privacy. Move-ins begin Oct. 15.
Owners can also rent their units out as hotel rooms in their absence, effectively working around the city’s Airbnb restrictions, according to John Beene, special counsel at Stroock Stroock & Lavan, a New York-based real estate law firm.
“There must be a market for people who want to own something for an investment vehicle but don’t need to live in it,” said Beene, who is not involved in the project. “It’s a very creative solution.”
Hotel representatives declined to say how the Ritz, which manages the rentals, splits that money with unit owners.
New York state law requires a resident to be present when renting out a unit for fewer than 30 days. That prevents many investors from adopting the kind of model offered at the Ritz. Setting up a short-term rental would be arduous at best for many homeowners in the city, and perhaps impossible based on local zoning.
“Today in the city there isn’t anywhere you can start doing Airbnb lawfully,” Beene said. “In an area where you can have a hotel, yes, there’s a path to getting an approval for a transient use, but there’s some code implications — you’re not going to be able to do it and comply with code without permit filings and a lot of paperwork.”
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Despite limiting stays and a lagging tourism industry in Manhattan, the Ritz is poised to break the NoMad neighborhood price-per-square-foot record when Unit PH42A, under contract for $7.8 million, closes. A TRD Pro analysis of city data shows that would price the 1,750-square-foot two-bedroom at $4,457 per square foot, breaking the previous record by roughly $200.
“We priced aggressively and we achieved those numbers,” Douglas Elliman’s Erin Boisson Aries, the broker leading sales at the property, said.
Eight of the building’s 16 units are in contract for the full asking price or above. Nightly rates for the one-bedroom units range from $4,000 to $20,000 and the two-bedrooms go for $9,000 to $25,000 a night. Last-minute bookings for hotel rooms on Friday started at just under $1,000.
Owners at the Ritz are betting tourism will return in full to Manhattan, which so far hasn’t happened.
The borough’s domestic tourism is lagging behind 2019 levels and has not recovered to the extent that Brooklyn’s has, according to data from Placer.ai, which tracks cell phone location data. Tourism in Manhattan in June fell relative to 2019 for the second straight month, despite briefly eclipsing pre-pandemic numbers in April.
While Placer doesn’t track trends within different sectors of the tourism industry, it does track visits to luxury retail brands. The rates are down nationally, suggesting tourism among the upper crust in Manhattan could also be down.
“For the months of June and July we’re running high-teens declines for much of the luxury sector, according to the luxury retail index,” said R.J. Hottovy, head of analytical research at Placer. “I imagine [Manhattan] is not too different from the national trend on that one.”
Hottovy pointed to inflation, the end of pandemic-related stimulus payments and the re-emergence of travel to Europe as possible explanations for Manhattan’s slow tourism season. Things could get worse before they get better: Summer is typically the city’s peak tourism season until the holidays.
“We don’t see strong visitation trends in the fall,” Hottovy said. “As things business-wise normalize, I think you’re going to see a rebound in tourism. I just don’t know how quickly that’s going to happen.”