The Yard is opening a new location out of a now-defunct Midtown hotel.
The flex-office provider told The Real Deal that it has signed a management agreement with the owner of the former Courtyard by Marriott at 8 Herald Square, which is at the corner of West 35th Street and Sixth Avenue.
The 76,000-square-foot building is already in the process of being converted into a flex-office space, with hotel rooms on the fourth and fifth floors turned into private offices. A partial opening is planned for Feb. 15, according to the company’s co-founder, Richard Beyda.
The makeover will create about 180 private offices, and the hotel’s sky lobby on the third floor will accommodate conference rooms and co-working areas. The hotel’s gym and a rooftop bar will become part of the amenities in the future, according to the Yard.
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The Courtyard hotel closed last fall, becoming one of the many casualties of the pandemic, which has decimated the city’s hospitality industry.
But until about 10 years ago, the property was actually offices. Hidrock Properties, through an entity called 960 Associates, took over ownership of the building in 2009 and converted it to a hotel. The Courtyard property opened in 2013 and Hidrock sold its interest in 2015 at a valuation of $132 million, according to the company’s website.
Property records show the building is still deeded to 960 Associates.
The 8 Herald Square site is the Yard’s first to operate under a management contract rather than a traditional lease, Beyda said. Under the agreement, the Yard gets paid by the landlord for leasing and managing offices, akin to how a hotel management company works with a property’s owner.
The Yard is now in conversation with other landlords in the city to open new locations based on management agreements, according to Beyda. It currently has 13 sites in New York, Washington, D.C., and Philadelphia.
The pandemic exposed the risk of running flex-offices under traditional leases, and some companies within the space are trying to switch their existing leases into management agreements.
Knotel, for one, is facing mounting lawsuits filed by its landlords for unpaid rent. The startup filed for Chapter 11 protection earlier this month and is in the process of being acquired by Newmark.
Beyda said the Yard isn’t abandoning its lease-based locations, and that the company’s future growth will be based on a mix of both models.
“The dynamics [have] to be the same. The property has to be the right property. And economics needs to be the right economics,” he said. “If you come in with a landlord, and you both have realistic expectations, and the location works … it should work.”