Any hotelier who has worked in New York will tell you that opening a hotel in Manhattan is never easy. But for a developer to select Manhattan as his first hotel market is especially challenging. This year, New York-based investment, development and management company Lexin Capital is taking the plunge and opening its first hotel in midtown Manhattan.
In 2002, Metin Negrin founded Lexin Capital, an investment firm that invests its own capital and makes direct investments in real estate. After more than a decade of investing in residential and commercial buildings, Negrin felt ready to take on the hospitality industry.
After acquiring a prime site on the corner of 28th Street and Sixth Avenue in the city’s Flower District three years ago, Lexin is set to open Manhattan’s first Hyatt House extended-stay hotel in the fall. “Originally, we were going to do apartments there,” Negrin said. But after learning that a hotel had previously been planned for the site, the team began to consider hospitality as a better option. They hired JLL to conduct feasibility studies on opening another hotel in the Flower District (the area is already home to a Kimpton, a Holiday Inn, a DoubleTree, a Fairfield and a Cambria), and the report came back “very positive,” which Negrin credits to the growth of the nearby “Silicon Alley” tech-focused district, as well as plenty of nearby tourist attractions.
The report also suggested that an extended-stay hotel could be a better fit for the spot than a traditional hotel, which fit well with Lexin’s residential background. “It’s a marriage between a residential property and a hotel,” Negrin said. When it opens later this year, the Hyatt House New York/Chelsea will be half-filled with what Negrin calls “small apartments” for long-term guests and half-filled with traditional hotel rooms.
And while Negrin’s experience in residential and commercial real estate prepared him for many of the challenges of developing in Manhattan, launching into the hotel industry presented some new experiences. “The whole [furniture, fixtures and equipment] aspect was unfamiliar to us,” he said. “We wouldn’t have to do that in an apartment or a condo, because the buyers do that. So that was a challenge for us.”
That said, he added, overseeing the “enormous amount of details” involved in creating a hotel was not difficult as much as it was complex. “Everything has to be ordered a month in advance,” he said. “And the logistics aspect is huge in Manhattan because it’s not easy to deliver things. And then there’s the installation!”
“With every project, we learn new things,” Negrin said. “We know what we know and we know what we don’t know. That’s why, in this case, we reached out to Hyatt and we signed a franchise agreement.”
Having the support of a brand can be very helpful, especially when pushing into a new industry. “We felt pretty good about the Hyatt development team and the senior people at Hyatt that we met,” Negrin said. Like Hyatt, he added, Lexin likes to buy and develop properties for long-term holds. “We liked that it was a management company that owned a lot of its hotels.”
The Lexin team was also eager to open the first Hyatt House in Manhattan. “That was a plus for us,” he said. “There’s a nice premium of being the first.”
Lexin and Hyatt also considered several third-party operators to handle the daily life of the hotel, finally selecting Real Hospitality Group. “We don’t pretend to know that business,” Negrin said. “We brought what we knew to the table, but we were very conscious of what we don’t know. We wanted to partner with the experts.”
Of course, partnering with a brand presented its own challenges. “We had to adopt their standards into an urban model,” Negrin said. “That was challenging for both sides—Hyatt’s development team and our team—to figure out the optimal size, optimal layout and the optimal [number of] rooms for a smaller space.” Even the brand’s standard furniture had to be redesigned to fit an urban layout. New York-based Nobutaka Ashihara Architect was tapped to build the 30-story hotel, and was able to fit in 150 studio and one-bedroom units.
Working closely with Hyatt and Real Hospitality, Negrin said, the Lexin team learned a lot about the hotel industry. “Some things we learned about the business is how much to focus on the guest experience—how they enter, how they spend their time in the hotel, what they do in the rooms, what time they come in, what time they come out and how long they stay.” They also learned how the physical properties of a hotel translate into the guest experience, and how all of those elements together can make an investment successful.
And now that the company’s first hotel is almost ready to open, Negrin said that the Lexin team is looking forward to the next one. “Hotels are part of our portfolio now,” he said. “We have looked at other hotel deals as well—and not necessarily development, but also purchasing an existing property. We’re open for more investment.”