Developer Steve Witkoff on why LA is a good, cheap bet for the next Edition
New York developers Steve Witkoff and Howard Lorber recently broke ground on their first Los Angeles project, the first Edition-branded hotel on the West Coast.
The project, which is being built in partnership with Marriott and hotelier Ian Schrager, is one of several new proposed or under construction hotels in the area and is slated to have 190 hotel rooms, 20 condominium units, a restaurant, bar, two rooftop pools and nightlife venues.
We sat down with Witkoff, who previously built Editions in both New York and Miami, to get his take on why West Hollywood is the next hot market for the Edition brand. Read on for a closer look.
You’ve been bullish on the Edition brand for several years now. What made you believe in it from the start?
We knew it was going to be a hit from the minute we met with Arne Sorehnson, the CEO of Marriott, and Ian. You have the Marriott Corporation, which manages the reservation system and the hotel. Nobody does it more professionally than them. You put that together with the creative side that Ian brings and you get a very powerful concoction. It’s perfect because there have been so many other cool, boutique hotels that fell down on management.
Some would say it’s a strange partnership between Schrager and Marriott.
The question originally was definitely could Marriott and Ian work together? If you were going to make a bet on this brand, that would be the only issue. Would Ian be able to build to a budget as Marriott might define it and could Marriott deliver a service regimen that Ian wouldn’t feel diluted the lifestyle sensibility he wanted to bring? They’ve figured that out and that’s the genius of the partnership.
How exactly is the partnership structured? Who owns what?
The actual equity ownership is a 50/50 joint venture between Witkoff and New Valley, the real estate arm of Howard’s Vector Group. The Edition brand was originally conceived by Marriott in collaboration with Ian Schrager. Marriott is the manager of the hotel. They don’t have any equity.
Why did L.A. make sense as the next new market for the Edition?
It’s not Los Angeles for us. It’s West Hollywood, which we regard as maybe the toughest barrier to entry market in the country. It’s very difficult to get approvals and entitlements there. I think it’s even tougher than San Francisco. This was a pristine site. It’s the absolute closest site in West Hollywood to Beverly Hills. You have these sweeping city and ocean views from the top of the hotel.
This area has become kind of a magnet for posh new hotels. We recently reported that West Hollywood’s hotel inventory is going up by 36 percent. Are you worried about competition?
There’s a lot of talk. We’ve seen reports in West Hollywood about the House of Blues site but that’s not an entitled site today. It may well be a hotel one day but it’s certainly not today. Other than the James down the block, nothing else is [in advanced stages] right now in West Hollywood. When we deliver in three years, the supply is going to be way down because there’s not a lot of construction financing out there for hotels anymore. We got our construction financing before the market started going through its gyrations.
So, you’re not concerned about the market?
I say it for New York and I say it for Los Angeles: It’s a winners and losers market out there. Whether you’re talking about hotel or condo development, the fact is that thoughtful development and the best site wins. In New York, there’s been plenty of supply coming into the market – you’ve got a lot of hotels whose RevPAR has been hit – but, if you segment and really look at who has been hit, it’s mostly the side street hotels and the select service hotels. The select service hotels are the ones that are most impacted by Airbnb because they don’t have any programming. The only way for them to compete is just to keep knocking down their rates.
Do you know how the Miami Edition is doing?
The Miami hotel is now the rate leader there. It’s running way ahead on this year’s budget. It could be running at two times where F&B budgets were. That’s because the program is so good.
You have some condos at the L.A. edition. How are you feeling about the condo market here?
Our building is roughly 440,000 gross square feet, including parking and everything, and the condos are only 60,000 net sellable square feet. We only have 20 condos. We believe L.A. is becoming a market that’s receptive to apartments. At Sierra Towers, right up the block, which is a 1980s building, you’ve got a penthouse that just traded at $4,500 a foot and there are plenty of other apartments that have traded north of $2,700 a foot. It doesn’t have a lot of amenities but it trades at that because the views are amazing.
Who’s the target buyer at the Edition?
I’m taking an apartment there and so is Howard. It will be high-end New Yorkers and people that are going that are going back and forth. We think it’s going to be a very easy sales market to sell 20 apartments to people who are visiting and want the services regimen.
Tell us a little bit about the condo product.
What we’re building here is going to be unparalleled in this area. We have 12-foot clear ceilings. Every single residence has somewhere in the neighborhood of 600 to 700 square feet of outdoor space. It reminds me a little bit of some of the very high-end new development that’s happening on Central Park in New York or even in the West Village on the river. I think that we’re bringing that sort of sensibility to this project.
Any word on prices?
We haven’t thought about it a lot. We may wait until we’re delivered and built to really sell here.
It sounds like you’re getting excited about the L.A. market. Will you do more business on the west coast?
Absolutely. That’s an unqualified absolutely. I really like this market. L.A. is an incredibly cheap market compared to New York. It’s maybe the cheapest of all the gateway markets for condominiums.