By Steve Cuozzo
January 20, 2014 | 10:47pm
The new Marriott Edition Hotel will bring the creative genius of Ian Schrager back to the Times Square area for the first time in years, after his earlier Paramount and Royalton hotels were unrecognizably altered by new owners.
But it’s taken a herculean joint venture involving some formidable dealmakers to set the stage for him — as is clear from the recent news of final plans for the Times Square Edition hotel at 701 Seventh Ave.
Last week’s official announcement might seem anticlimactic after two years of coverage. But it revealed much that’s new about the project at an iconic Midtown corner — an exquisitely complex collaboration involving a remarkable cast of characters including Steven Witkoff, Marriott International Chairman J.W. Marriott Sr. and CEO Arne Sorenson, Howard Lorber, Ian Schrager and Barry Sternlicht.
Among the new features: fewer guest rooms and much more retail space than was previously known, a requirement for Marriott to buy the project’s hotel portion from the developers in event of a default, and the withdrawal of a former major investor.
Since preliminary plans for the mixed-use tower were first announced in October 2012, numerous details have changed several times. Nothing unusual about that for a venture involving so many participants, public and private companies and requiring air-rights transfers from Broadway’s Booth and Plymouth theaters.
But the twists and turns are worth following, because the 39-story tower will bring epic change to Times Square’s north end. It will rise on the northeast corner of Seventh Avenue at 47th Street, at the top of the “bow-tie” and across the street from 2 Times Square with its famous Coca-Cola sign. The rendering on this page shows the entire tower, crowned by the Edition sign, for the first time.
It will be Manhattan’s second Edition, following the planned completion of the first in 2015 at the landmarked Clock Tower at 5 Madison Ave. The “luxury lifestyle” Edition brand, which boutique-hotel wizard Schrager is creating in collaboration with Marriott, was conceived as Marriott’s answer to competitors attuned to younger, hipper clientele — especially Starwood Hotels and Resorts’ W line.
The Times Square Edition’s joint-venture developers are The Witkoff Group, Winthrop Realty Trust, Lorber’s New Valley LLC and Mark Siffin’s Maefield Development.
Gone from the lineup: Infinity Urban Century, whose co-managing partner Steve Kassin enthused to us over the project in October 2012. A rep for the development partnership said Maefield bought out Infinity’s stake.
Marriott International will manage the hotel under a long-term agreement. When opened in 2017, it will have 452 guest rooms (previous reports: 500); 100,000 square feet of retail, dining, entertainment and event space (previous: 66,360 square feet); and a huge, 18,000 square-foot high-def LED sign wrapping around the corner (previous: 12,700 square feet).
Sternlicht’s Starwood Property Trust and iStar Financial provided $815 million in construction and mezzanine financing arranged by Carlton Group chairman Howard Michaels, who also helped facilitate the Edition partnership for Schrager and Witkoff. Starwood Property Trust and Starwood Capital Group Global have an equity interest in the transaction, the venture partners said.
(Although Sternlicht is chairman both of privately held Starwood Capital Group and publicly traded Starwood Property Group, he has not been CEO of Marriott competitor Starwood Hotels & Resorts since 2005.)
As additional loan collateral at 701 Seventh Ave., Marriott “has agreed to provide the lenders with the right [in event of default] to require Marriott to purchase the hotel component … during the first two years after opening for $314.6 million,” or $696,000 per room.
As Lodging Advisors analyst/consultant Sean Hennessey explained, the so-called “put” clause” protects the developers, who “can maintain ownership if the hotel is successful,” but can “force Marriott to buy it [at cost] if not.”
A failure would seem highly unlikely given Marriott’s track record and the city’s booming hotel market. But the “put” made it easier to finance the project because the lender doesn’t have to underwrite the hotel, “since a quality operator, Marriott, is on the hook for the cost of the hotel,” Hennessey explained.
Preliminary plans for 701 Seventh Ave. first came to light in 2012 when Witkoff, Maefield, Infinity and New Valley — after years of secret negotiations with landlords and tenants — completed a $430 million acquisition of two corner buildings.
Once home to tourist magnets Sbarro’s, Tad’s Steaks and Pig & Whistle, they’re now wrapped in black netting to prepare for demolition — and a new wave of higher-spending visitors three years from now.