The Department of City Planning has certified the developer’s application to transform 509 Madison Avenue from a 21-story office building to a 30-story hotel, Crain’s reported. This officially launches the application into the seven-month Uniform Land Use Review Procedure, which requires approval from numerous stakeholders before Kensico can move forward.
Hoteliers Nabil and Fouad Chartouni are planning the Lowell Modern, an addition to the luxurious Lowell Hotel on the Upper East Side. Their proposal calls for 96 rooms, amenities and a 130,000-square-foot lobby, fronting East 53rd Street. There would also be 3,300 square feet of ground-floor retail space on Madison Avenue.
Internal demolition of the office building is already underway and the last tenants are expected to leave after Christmas, a Kensico consultant said. Tenants in the building at the time the application was filed in August include investment firm Banyan Tree Capital Management, private equity firm Yellowstone Capital Partners and Kensico itself.
Full demolition and construction is expected to begin early in the new year, with a target of completion in early 2028.
Kensico put the leasehold of the office building on the market in 2017, even though it had a high occupancy rate that remained strong. The leasehold was never sold, forcing the pivot.
Kensico has developed and invested more than $2 billion in real estate worldwide, including office, retail and hospitality properties. The Lowell Hotel, which it acquired in the 1980s, is considered one of the more luxurious hospitality venues in all of New York City.
But hotel development has become increasingly difficult in the Big Apple, and not just because of the way the pandemic temporarily disrupted tourism. A 2021 City Council bill required a special permit for new hotel developments, essentially freezing the industry’s construction pipeline; not a single permit was approved in the first year of the legislation.
The daunting prospect of developing a hotel today could, on the other hand, yield great rewards. The lack of incoming supply — plus the crackdown on the short-term rental industry — is helping to boost occupancy rates and room rates at properties that remained tight during the lean years.
— Holden Walter Warner
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