The Ritz-Carlton New York NoMad (The Ritz-Carlton New York, Illustration by Priyanka Modi for The Real Deal with Getty)
Rules for you, not for me.
The Ritz-Carlton NoMad is expected to break neighborhood price records and roll out a model that circumvents the city’s short-term rental restrictions.
Paul Kanavos’ Flag Luxury Group hotel/condo combo limits owners of the 16 penthouse units to 120 days per year and 29 days at a time at the branded luxury residences.
The arrangement means the property can retain commercial zoning, rather than a mix of commercial and residential, as owners are not considered full-time residents. It also circumvents restrictions in place at 25 West 28th Street, which is zoned as a manufacturing district, where residential zoning is generally not permitted.
Penthouse units at the Ritz are equipped with lockable closets for owners to keep residents’ belongings while guests use the condos as hotel rooms. All rooms come with two room numbers, so owners can rent one room and stay in the other with complete privacy. Move-ins begin October 15.
Landlords can also rent out their units as hotel rooms while they’re away, bypassing the city’s Airbnb restrictions, according to John Beene, special counsel at Stroock Stroock & Lavan, a New York-based real estate law firm.
“There has to be a market for people who want to own something for an investment vehicle but don’t need to live in it,” Beene said. “It’s a very creative solution.”
Hotel representatives declined to say how the Ritz, which handles rentals, shares that money with unit owners.
New York State law requires owners to be present when renting units for less than 30 days. This prevents many investors from adopting the type of model offered at the Ritz. Setting up a short-term rental would be daunting at best for many landlords in the city, and possibly impossible depending on local zoning.
“Today in the city, there’s nowhere you can start doing Airbnb legally,” Beene said. “In an area where you can have a hotel, yes there is a way to get approval for transitional use, but there are code implications – you won’t be able to do that and comply with the code without a filing of permit and a lot of paperwork.”
Despite limited stays and a lagging tourism industry in Manhattan, the Ritz is poised to break the NoMad neighborhood’s price-per-square-foot record when unit PH42A, under contract for $7.8 million, closes. . A TRD Pro analysis of city data shows the 1,750-square-foot two-bedroom would be priced at $4,457 per square foot, beating the previous record by about $200.
“We priced aggressively and we hit those numbers,” said Erin Boisson Aries of Douglas Elliman, the broker responsible for sales of the property.
Eight of the building’s 16 units are under contract for full asking price or more. Rates per night for one bedroom units range from $4,000 to $20,000 and two bedroom units range from $9,000 to $25,000 per night. On Friday, last-minute reservations for hotel rooms started at just under $1,000.
The owners of the Ritz are betting tourism will return to Manhattan, which has yet to happen.
Domestic tourism in the borough is lagging 2019 and Brooklyn levels, according to data from Placer.ai, which tracks cellphone location data. Tourism in Manhattan in June fell from 2019 for the second straight month, despite a brief eclipse from pre-pandemic numbers in April.
While Placer does not track trends across different sectors of the tourism industry, it does track visits from luxury brands. Rates are down nationally, suggesting that tourism among Manhattan’s high society may also be down.
“For the months of June and July, we are seeing teenage declines for much of the luxury sector, according to the Luxury Retail Index,” said RJ Hottovy, head of analytics research at Placer. “I imagine [Manhattan] isn’t too different from the national trend on that one.
Hottovy pointed to inflation, the end of pandemic-related stimulus payments and the re-emergence of travel to Europe as possible explanations for Manhattan’s slow tourist season. Things might get worse before they get better: summer is usually the city’s peak tourist season until the holidays.
“We don’t see strong visitor trends in the fall,” Hottovy said. “As things normalize commercially, I think you’re going to see a rebound in tourism, I just don’t know how quickly that’s going to happen.”
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