Waldorf Astoria Moves Toward Luxury Condo Conversion and Anticipates Closing During the Renovation for up to 3 Years, Costing nearly $1 Billion
After China-based Anbag Insurance Group purchased the Waldorf for $1.95 million in late 2014, the firm’s chairman expressed the intent to convert the hotel into high-end condos, while maintaining a smaller five-star hotel. In 2015, the NY City Council passed a law banning hotels with more than 150 rooms from converting over 20% of the property into residences. The law exempted recent transactions, including the Waldorf. Standing in the way of moving forward were the 1,221 Waldorf union workers, whose jobs were protected by the Waldorf’s contract with the New York Hotel and Motel Trades Council, a union which represents hotel workers. The Waldorf reached a record deal with the union in which the hotel could pay almost $149 million in severance packages over the next two years. The average payout will be more than $142,000, with a handful of employees eligible for more than $300,000. One longtime worker is walking away with $656,409.68. Hilton Worldwide will continue to operate the hotel portion of the building. It has been announced that the entire hotel will be closed for renovation.
Other major Manhattan hotels have opted to fully close down while undergoing extensive renovations, starting with the Peninsula in 1998. The Plaza Hotel, later, in 2004, through its developer, El Ad, decided to close the hotel before starting the demolition and reconstructive work. When El Ad elected to proceed, first, by abatement of asbestos and other environmental contaminants, Osborn Law was retained, as environmental counsel, to oversee the preparation of technical analyses and to address regulatory concerns relating to the contracts for abatement and demolition of asbestos containing plaster. The environmental consultant and abatement team were able to carry out the asbestos abatement, based on regulatory protocols which provided for the disposal of plaster with asbestos content in excess of 1% ACM as “hot”, while plaster with lesser asbestos content could be disposed of, much more cost-effectively, as construction debris.
Keeping the Lights On During Renovation
On the other hand, many hotels are renovated without closing a single day. During the 1990s, the New York Palace, and the New York Hilton continued to serve guests while undergoing large scale renovations. The New York Palace renovation was especially renowned as it featured the construction of an extravagant lobby which was built 50% at a time; while half of the lobby was being built, the second half was open to the public. Because of adept phasing, the hotel guest could barely discern that a renovation was taking place. Similarly, the NY Hilton coordinated adeptly to keep guests satisfied while undergoing an extensive renovation in the 1990s. Whether renovating “with the lights on” or fully closing down the hotel until completion of the work, honoring the following tips is essential:
- Make a thorough physical assessment of the area to be renovated, especially in an older facility with crumbling masonry, plaster, or corroded piping;
- Conduct an environmental assessment. Failure to account for asbestos, lead paint or conditions leading to mold contamination or legionella can cause delays and complicate renovation work;
- Prior to bidding the work, require the architect to provide a complete design and take care to sequence the work with a focus on avoiding dust contamination, security risks and accidents;
- Enter into sound construction and design contracts, which clearly define the scope of work, coordination and methods of dispute resolution; and
- To avoid overruns and delays, develop a streamlined method of communication and prompt decision-making among the key players – the hotelier, architect and contractor.
If You Decide to Stay Open While Renovation, Meet the Daily Challenge
The theme is the same whether renovating or operating a hotel. Be responsive, efficient and user-friendly. Keeping the lights on during renovation is a daily challenge, requiring a committed renovation team that is well informed, consistently involved and focused on schedule, budget and serving the guest.
About the Author
John E. Osborn, Esq. is the Managing Partner of John E. Osborn P.C., a 10-lawyer firm concentrating in complex construction, environmental, real estate law and litigation, which he founded in 1992. Mr. Osborn and the firm are focused on legal issues relating to the development, construction, and operation of hotel properties.
John E. Osborn P.C. is a 10-lawyer firm founded in 1992. The Firm’s practice concentrates in complex construction, environmental, real estate and commercial litigation and focuses on representing large property owners, construction managers, contractors and design professionals. The types of owner-clients that the Firm represents include school districts, charter schools, colleges and universities, hotels, office buildings, apartment complexes, restaurants, nightclubs, healthcare facilities, nursing homes, arenas, museums, industrial properties, airports, auto dealers and commercial and residential developers. A thorough, long-term knowledge of the real estate, construction and environmental industries and design profession—together with comprehensive experience dealing with government entities—is critical to the Firm’s success.