Hotel Chelsea Seeks Buyer for Rehab
The Wall Street Journal 10/19/10
By CRAIG KARMIN
Hotel Chelsea, the legendary downtown landmark that’s been home to famous writers, artists, musicians and innumerable down-on-their-luck bohemians, is now the latest New York icon up for sale.
The Chelsea’s 15 shareholders, led by three Hungarian families who bought the 12-story red-brick building in 1946, are selling the property after concluding that the task of modernizing the hotel and apartment building was too challenging, one owner said. A buyer also would likely end the Chelsea’s tradition of giving artists breaks on payment schedules to assist their careers.
“The way we want to run the hotel is not necessarily the way the business world works,” says Paul Brounstein, one of the shareholders.
The West 23rd Street building is nearly 200,000 square feet and includes 125 hotel rooms and about 100 rental apartments, some of which are under rent regulations. It also houses the El Quijote restaurant, a famous guitar shop and other retail adjacent to the property.
Hotel Chelsea opened in 1884 as one of the city’s first co-ops. Much of the early Queen Anne architecture remains, including a grand staircase and the black cast-iron balconies. But hotel analysts say its aging lobby, retail and corridors are in need of renovation.
The cost of those improvements, which could run to millions of dollars—and the infighting among the controlling families—helped motivate the decision to sell, say people familiar with the matter.
Hotel Chelsea’s rich history has been well documented in books, films and American popular culture. It was reorganized as a hotel around 1905 and attracted literary figures like Thomas Wolfe and O. Henry.
Beginning in the 1960s, the Hotel Chelsea not only hosted movie stars, poets and musicians, but it served as a muse or setting for some of their work. Arthur C. Clarke wrote “2001: A Space Odyssey” there, Leonard Cohen wrote the song “Chelsea Hotel No. 2” in its honor, and Andy Warhol directed an experimental film, “Chelsea Girls,” shot at the hotel. The film starred German singer Nico, who then recorded an album, “Chelsea Girl,” with a track about the building’s inhabitants.
Hotel Chelsea was also associated with darker episodes. Dylan Thomas was a resident there when he died of alcohol poisoning in 1953, and the girlfriend of punk-rock legend Sid Vicious of the Sex Pistols was stabbed to death there in 1978.
As for its management, the hotel was known for liberal rent-collection policies with some artists. “We would sit down with folks and try to figure out a payment schedule,” Mr. Brounstein says.
By 2007, there were signs that not all the shareholders agreed with this sort of policy. Hotel Chelsea hired BD Hotels, which owns and operates several New York hotels, to manage the property. The new managers succeeded Stanley Bard, whose family had managed the hotel for about 60 years but lost a power struggle with some of the other families.
“The board thought it should be run more corporate. I disagreed with that philosophy,” Mr. Bard says. “Money wasn’t the only consideration for me.”
Under BD Hotels, management cracked down on people who were behind on their rent, and some tenants left with debts that ran to more than $10,000 that weren’t pursued, a BD Hotels official says. The firm was removed as manager in 2008. Since then, the hotel has resumed a more lenient treatment of artists.
The Hotel Chelsea owners took other steps to upgrade the property, such as renovating the ballroom and opening a lounge in the basement. The hotel remained profitable, even during the economic downturn, Mr. Brounstein says.
“It’s been running profitably on its good looks and charm,” says Douglas Harmon, a senior managing director at Eastdil Secured, which is advising the sellers.
He says the Hotel Chelsea brand name could be valuable for any hotel company trying to break into New York’s highly competitive market.
Others suggest a new buyer may well follow the example of the Gramercy Park Hotel and the Ace Hotel, formerly the Breslin Hotel, where early 20th century hotels were modernized by new owners to attract a younger, more affluent crowd.
Even Mr. Brounstein expects new owners would take into account Chelsea turning more upscale: “I think the neighborhood has changed faster than the hotel has,” he says, “and it has become anachronistic for the hotel not to change as well.”