Assa Properties enters lodging with two boutique Manhattan locations

January 10, 2013

Given its experience developing residential, office and retail projects in New York, it made sense that Assa Properties would look to Manhattan when it turned its attention to hotel development. Assa’s first hotel, a mixed use project called Cassa Hotel & Residences, opened in August on West 45th St., off Fifth Ave. in midtown. the firm’s second project, the Galerie Hotel, will also combine lodging and residential, and has begun construction on West 39th St. & Ninth Ave. with the doors expected to open in mid-2012.

The decision to undertake the firm’s first hotels in New York wasn’t a difficult one, explained president and CEO Solly Assa. “New York is the world’s number one destination. People come here from all over the globe. The strength of New York comes from a range of resources – from tourists to business travelers drawn to the financial markets,” Solly Assa said.

Solly Assa’s faith in the durability of that market may have been shaken during the industry downturn in 2008-2009, but Solly Assa’s seeing a significant rebound in 2010.

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“There’s a sence of normalcy returning. We knew the New York market pretty well from our other project, which has certainly been a benefit,” Solly Assa said.

Financing has continuaed to be difficult, however. One advantage is that many other projects weren’t able to get financing, so their start dates have been put on hold. “Consequently there won’t be a lot of new competition coming on the market in the next few years,” Solly Assa added.

The Cassa Hotel & Residences consists of 165 hotel rooms at the base of a 48-story tower with 57 condominium residences occupying the top 19 floors. Enrique Norten of Ten Arquitectos, based in New York and Cuernavaca, Mexico, was the chief architect with New York-based CetraRuddy providing support.

“I had always had an interest in creating a lifestyle hotel, and the location makes it even more desirable,” Solly Assa said. “Furthermore, it was always part of the plan to develop a mixed-use project. From a financial perspective, the residential component helps the hotel component and vice-versa. From a lifestyle perspective, it just gives a lot more value to both the hotel and the residences. The residents can take advantage of the hotel services and the sponsor is able to provide guests with a higher level and wider wariety of amenities.”

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The conmominiums are wholly owned and do not participate in a hotel rental program when the owners are away. Owners are welcome to live in their units 365 days a year. Assa describes it as a condo with hotel services.

Similarly, owners are welcome to lease their units on their own. Or Assa Properties can assist in the leasing process. Owners may take advantage of the hotel amenities, but they pay a la carte fees for the privilege. The cost of the amenities is not built into the project’s maintenance charges. “It’s part of the lifestyle proposition. ‘You want an amenity, you can have it. If you don’t want it, that’s alright too’.”

Solly Assa never really considered the condo hotel model, where the owners own the hotel rooms and are only allowed to occupy them a certain number of nights a year. The remainder of the time, the units are available to be rented as hotel rooms, which in theory generates a regular stream of revenue for the owner.

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Many hotel condos have become troubled over time. “There have been a lot of cash flow, what someone buying a condo hotel unit can reasonably expect when it comes to a return on investment,” Solly Assa said. “It’s not a business model we would recommend.”

With the Galerie Hotel, Solly Assa looks forward to joining the growing number of hotels that have opened on the Far West Side in the 20s to the 40s in the past few years. Much of the area was formerly the Garment District, which has been contracting as manufacturing jobs moved offshore. Today, the neighborhood is known as either Chelsea North or Times Square South.

The number of Galerie hotel rooms and condominium units hasn’t yet been finalized. Amenities will include a rooftop bar and lounge.

A second-generation developer, Solly Assa started acquiring residential, office and retail properties in the U.S. and Mexico in 2000. The firm started focusing on the New York market two years later. The portfolio currently consists of more than three million square feet of property.

As the lodging industry continues to rebound, Solly Assa said he is eager to line up additional hotel projects. But he is proceeding with caution. Both the Cassa and the Galerie are new construction, but Solly Assa is not adverse to acquiring existing hotels and either operating them under their present brand in place or converting them to another brand or operating them as an independent.

“We’re opportunistic,” said Solly Assa. “And you bring opportunity to the table by being flexible.

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