Commercial Real Estate & Advisory

Luxury Hotel in Meat Market Has Locals Wielding Cleavers

By Gabriel Sherman | October 6, 2003

hotelA local developer is going forward with plans to build a 34-story, 170,000 square-foot luxury hotel designed by the French architect Jean Nouvel in the meatpacking district -after a two-year battle with neighborhood activists who sought to have the plan scrapped.Developer Stephen Touhey told The Observer that the hotel. At Washington Street and West 13th Street, can be built as-of-right under current zoning regulations.  It’s Mr. Touhey’s latest effort to revive an original plan that called for a 450-foot-all luxury condominium tower designed by Mr. Nouvel on the site.In March, after battling fierce opposition from neighborhood groups, Mr. Touhey pulled his application from the city’s Board of Standards and Appeals before it had ruled on the legality of his proposal.

With his current hotel project, Mr. Touhey said he expects to secure all necessary building permits and financing by early 2004.But neighborhood activists say they haven’t fired all the arrows in their quiver just yet.”We intend to fight it any way we can,” said Andrew Berman, the executive director of the Greenwich Village Society for Historic Preservation.  “A 450-foot tower is a wholly inappropriate exploitation of a newly designated historic district.  Everything around is low-rise development, and Mr. Touhey clearly intends to exploit these unobstructed views.”After withdrawing his bid to build a luxury apartment building, Mr. Touhey reconfigured the $120 million project as a high-end boutique hotel that will house 115 guest rooms, an Asia-style spa, two restaurants and 30,000 square feet of retail space.  Mr. Touhey plans to build the hotel as-of-right, and is currently in contract negotiations with two hospitality operators to manage the property.He said its sculpted exterior by the renowned French architect Jean Nouvel, who designed the acclaimed L’nstitut du Monde Arab and the Foundation Cartier in Paris, would be an asset to the fast-developing lower West Side of Manhattan, and that his tower is in proportion to the 32,000-square-foot lot on which he intends to build.But activists who have been fighting Mr. Touhey on his project remained opposed to high-profile architecture that is out of context with the surrounding streetscape.”No matter how famous an architect they bring in to do the facade of the building, it will be overwhelming.” Said Sean Sweeney, the chairman of Community Board 2’s landmarks committee, which has criticized the scale of the project.The activists recently won some support from the city for keeping part of the meatpacking district a low-rise commercial and retail district.  The city’s Landmarks Preservation Commission designated the area – bound by a stretch of West 15th Street on the south West Street on the west, and Hudson Street on the east-an official historic district on Sept 9.  On Oct. 8, the City Planning Commission will hold a public hearing before ruling on the designation.

The City Council will issue the final ruling sometime in January.Mr. Touhey’s site is not technically affected by the ruling, as it sits just outside the proposed district.  But neighborhood activists who originally sought to include Mr. Touhey’s site in the designated area hope they can use the spirit of the new designation to their advantage as they continue to fight Mr. Touhey over his plans.”This points to why we originally urged that these blocks on Washington Street be included in the landmarked district,” said Mr. Berman.  “It would be shameful if this designation was followed by development that would have such a destructive impact.”BoomtownThings are moving fast in the meat-packing district, where residential desirability has increased now that fashion boutiques, high-end eateries and dimly lit lounges have been edging out the old meatpacking businesses that, especially on hot summer nights, made the area a less-than-perfect place to call home, even for New York’s famously adventurous young buyers.Indeed, while Mr. Touhey’s hotel is the result of his defeated effort to build a luxury condominium in the neighborhood, the market forces that drove him to propose the tower are only growing stronger.  Local brokers say the cobblestone quadrangle-with Keith McNally’s boisterous bistro Pastis at its lively center-has been the one bright spot in a downtown real-estate market still reeling from post-Sept. 11 downturn.  While rents in Soho and Tribeca have declined 30 to 35 percent since Sept. 11 and registered vacancies are topping 30 percent, rents in the meatpacking district rose more than 50 percent during the same period.

Commercial Brokers remain bullish on the neighborhood.  They see a wave of prospective tenants eager to boost their fashion cred by locating next to designer showrooms, including Stella McCartney, Alexander McQueen, Jeffrey, Carlos Miele and Diane von Furstenberg the Shop.  In the past year, fashion businesses have continued to explore real estate in the neighborhood.  In June, Bliss began scouting for a 5,000-square-foot spa on 14th Street, while both L.A. Eyeworks and designer shoemaker Charles David have been looking for 2,500-square-foot spaces on 14th Street.”As long as the landmark committee allows for new construction, the neighborhood will remain economically strong,” Bruce Sinder, the president of Sinvin Realty in Tribeca, said.  Mr. Sinder brokered some of the biggest deals in the neighborhood, including Vitra’s 10,0000 square-foot furniture showroom at 29 Ninth Avenue, Soho House’s 40,000-square-foot property at 29-35 Ninth Avenue, and the 50,000-square-foot headquarters of Estee Lauder salon subsidiary Bumble and Bumble on 415 West 13th Street.”In terms of rent, the meatpacking [district] is where Soho was in the early 1990’s,” said Richard Hodos, the president of Madison HGCD, describing the rise in commercial rents since 2000.  He cited Jeffrey, the pioneering haute department store that opened on 14th Street in 2000, when rents commanded approximately $18 per square foot.  Today, rents have jumped to more than $100 per square foot.It took more than a decade in Soho for rents to go up on a similar trajectory until rents peaked in early 2000 at $500 per square foot for street level retail along West Broadway.”

With the Landmarks ruling, I think it will drive even more people to the neighborhood,” said Faith Hope Consolo, the vice chairwoman of Garrick-Aug Worldwide, who has brokered deals in the area, including the 4,500 square-foot Carlos Meile boutique and the 5,000-square-foot Sally Hershberger Salon, both on West 14th Street.  “Labeling the meatpacking as an official district has brought even more focus to an already hot area.  But the neighborhood needs to be rounded out.  It can’t be just Jeffrey and Pastis.  We could see some bigger commercial brands in the area over the coming year.”Mr. Touhey won’t be alone in the neighborhood.  Michael Achenbaum, the developer of the Gansevoort-a $60 million, 13-story, 187-room hotel currently in the final stages of construction- was able to complete his project before the Landmarks ruling passed; he said that preserving the low-rise streetscape will bolster the long-term economic value of the neighborhood.”We look at the [Landmarks] ruling as a positive,” he said.  “We expect to attract a lot of guests in the media business and those who want to stay in an exciting environment.”The hotel, at the corner of 13th Street and Ninth Avenue, is scheduled to open in January.The hotel boom in the area has as much to do with the loud nightclubs and restaurants that have begun to populate the district as the influx of quality designers, attracting guests eager to experience the district’s mix of nightlife and shopping.  In addition to Mr. Touhey’s project and the Gansevoort, witness the 125-rom ocean-liner-themed Maritime Hotel (replete with porthole windows), which opened its doors just north of the district on 363 West 16th Street in June, and Soho House, the private members’s club and 24-room hotel at 29-35 Ninth Avenue, which opened to a deluge of media coverage and a cameo on Sex and the City-in May.

Natural Pressure

Unlike Mr. Achenbaum, most building owners see the Landmarks ruling as an artificial cap on the neighborhood’s recent explosion.  The district’s largest property owners have retained legal counsel to fight the city’s designation before it goes to the City Council for final approval early next year.”We have retained an attorney to explore our options,” said Michael Romanoff, the president of Romanoff Equities.  “We feel the buildings are of a nature that are not landmarkable. The locals want all the buildings to stay old. It’s out of touch with reality.  We want the property to be put to the best use to meet the present demand.”The Meilman Family, one of the largest property owners in the district with six buildings, including a third of the frontage on 14th Street that falls within the district, has also retained counsel to overturn the ruling-which the company said has undermined the value of its real-estate holdings in the neighborhood, which they have retained for the past 70 years.”What the Landmarks ruling does is freeze any potential development.

Currently, we are 40 percent under-built,” said Clifford Meilman, the manager of Meilman properties.  “Fourteenth Street is a major thoroughfare with subways and buses-it’s prime for better use.  Now it has basically been frozen.  Architecturally and stylistically, it does not fall in line with what [Landmarks] were trying to accomplish.  It doesn’t make any sense.”But the notion of “better uses” for the neighborhood riles some longstanding businesses in the district.  Since 1974, when the city sought to consolidate the wholesale meat and vegetable markets in the Hunts Point section of the Bronx, 47 independent food wholesalers have relocated to the sprawling 60-acre, 700,000-square-foot complex, making it the largest wholesale food-distribution center in the world.  Meatpacking-business owners in the district fear they have a limited future in Manhattan, where property owners are raising rents to capitalize on the growing demand from boutique and club owners.  They see Mr. Touhey’s hotel as the latest development fueling market pressures that will ultimately bring residential development fueling market pressures that will ultimately bring residential development to the district, which they fiercely oppose.  Local activists say that preserving the neighborhood requires it to remain  a viable place for the meatpackers to do business- an economic base whose nocturnal business activities are inconsistent with residential development.There, at least, Mr. Touhey agrees with them.The meatpacking district has a different look and feel than it did five years ago,” Mr. Touhey said.  “Only two years ago, there were only two boutiques here.  Now, there are upwards of 25.  Our hotel will bring in people.  All of these factors are putting pressure on the neighborhood to change.

Rising rents, cleanliness and better maintenance of buildings reflect that.  It’s a natural pressure.”Rising rents have already forced out some of the oldest meat businesses in the neighborhood.”Rents are going up-that’s a fact.” said Bob Wilkins, the president of Lamb Unlimited, a supplier of choice cuts to Citarella and Peter Luger.  “If your operation works under those conditions, great. If not, you have to go find another location.  When any cost goes up, that bothers me.””It’s vital to the future of this neighborhood that it stays commercial and the meatpackers remain,” Michelle Dell, the owner of the Hogs and Heifers Saloon at 859 Washington Street, said.  “How many Gaps do you need in New York?  They price everyone else out of the neighborhood. How can anyone else compete?”Ms. Consolo said the loss of the meat businesses was just a natural byproduct of the realities of Manhattan’s hypercompetitive commercial real-estate market.”This city is always changing, and the meatpackers’ days are numbered,” Ms. Consolo said.  “They’ll have to go someplace else.  They don’t need to be sitting on prime real estate.”Ms. Dell sees this shift all too clearly.”You start selling co-ops in this neighborhood for $5 million,” Ms. Dell said, “and do you think people will put up with meat trucks backing up at 3 o’lock in the morning, slippery sidewalks, and the smell of rotten beef and blood?”