Banking on Hospitality: Hidrock Realty’s Hotel Play
Billy Gray May 14, 2013, 10 a.m.
Every day, Jack Hidary walks the same Garment District streets that his grandfather, an apparel businessman, walked in the 1940s. “We probably go to the same shoeshine guy,” he said.
Mr. Hidary, the founder and CEO of Hidrock Realty, works out of a building on West 36th Street, and the family bonds are far more palpable than the Hidarys’ garmento history in the Midtown neighborhood. Jack works alongside his sons Abraham, Eddie and Steven at the 31-year-old company.
Real estate “wasn’t necessarily the game plan growing up,” Eddie said. “But as we got older and went to college, we started working here during the summers as interns and learned the business. That’s when I decided that I wanted to grow this company to the next level. And there’s no place like New York City.”
From its modest roots in suburban strip-mall ownership, Hidrock has amassed a portfolio spanning commercial offices, retail spaces, residential buildings and hotels that is worth roughly $1 billion by internal estimates.
The full-service firm’s recent foray into hotels has turned heads in the industry. In late 2009, Hidrock purchased a defaulted senior mortgage on 960 Avenue of the Americas for $40 million, and it won the 100,000-square-foot office property in a foreclosure auction eight months later. The note owner, Société Générale, had provided a $95.1 million loan to the Italian firm Statuto Group, which paid $105 million for the building shortly before the crash.
In the summer of 2010, Hidrock announced a $25 million, 168-room hotel conversion. Almost simultaneously, the company bought two low-rise buildings at 25 West 37th Street that it quickly decided to demolish and replace with a 173-room hotel. The Courtyard by Marriott at 960 Avenue of the Americas and the SpringHill Suites by Marriott at 25 West 37th Street will both open this month.
Late 2009 and early 2010 seemed a ripe time for hotel development, particularly in the Garment District, and not just because economic conditions allowed for bargain-basement acquisitions. “We saw a trend of a lot more tourists coming to the Herald Square area,” Eddie said. “You have Macy’s, the Empire State Building, the 34th Street retail corridor and Bryant Park. And we also saw a trend that the best use for a building in some cases was no longer office buildings, but hotels.”
Last year, a record 52 million tourists visited New York City. That was up from just 35 million international and domestic visitors in 2002. Mayor Michael Bloomberg listed the city’s cultural institutions and its reputation for safety as the main drivers of the industry, and said the goal was to have 55 million visitors by 2015.
“Ten times out of 10,” Abraham said, “if you have the ability to build a 100,000-square-foot building, a hotel use will be the best economic decision.”
The Herald Square area (or the Garment District, or, more recently, the Fashion Center) is changing in ways other than increased tourism numbers. And the Hidary family, with its 70-year history in the neighborhood, is well qualified to take advantage of it. “It was all jewelry and apparel,” said Abraham, who sits on the board of directors of the Fashion Center Business Improvement District. “Then we started to see the higher-end showrooms, and then the professionals and creative types—tech, software—came in. That was a seven- or eight-year trend.”
In addition to its local hotel properties, Hidrock owns four office buildings in the neighborhood, three of them on one block of West 36th Street and the other at 240 West 35th Street, which the firm recently reversed course on and decided not to sell, as it had announced it planned to earlier this year. (The Hidarys estimate that their portfolio is split more or less evenly between office, hotel and residential holdings.) In January, the company bought a parking garage at 59-61 West 36th with 86,900 square feet of developable space for $28.5 million.
“If you take a picture today of 36th Street and look at one from five years ago, there’s no comparison,” Jack said. “The hotels are going up, and building setbacks have added a prettiness to the street. Also, come 8 o’clock at night, there’s action in the streets. People are walking, coming and going. There’s life.”
On that note, Hidrock’s retail spaces on 36th Street have evolved from wholesalers to an 8,000-square-foot Irish pub, a pizzeria and a martial arts studio. Abraham said that hotels in the neighborhood are 90 percent occupied.
As busy as Hidrock is in the Garment District, the firm’s portfolio extends across the city. Last spring, the firm purchased a development site at 133 Greenwich Street, near the World Trade Center site, for $27.9 million. The firm again will partner with Marriott, this time on a 30-story, 317-key Courtyard by Marriott due to open in 2015.
“We’re still in the planning stages,” Jack said. “Because of its location in the vicinity of the [World Trade Center] memorial pools, we’re taking a very special approach. It’s not just a real estate deal. This is part of history. We’re going to take our time and do it right, out of respect for all the people who passed away on 9/11.”
The Hidarys praised the people at Marriott, but also said they’d be interested in different partnerships on future hotel developments. “Marriott has a lot of names,” Jack said. “And if I have a building in an area, I can’t make it a Marriott if there’s already one next door.”
Hidrock’s residential portfolio of three apartment and townhouse complexes is concentrated in south Brooklyn. (The four family members live “within a block of each other” in Midwood.) And the firm is making its first jump into Soho with a retail development on Broome Street near West Broadway. It is actively looking in Chelsea.
“The common thread, the theme, is New York,” Steven said.
Of course, another theme is family, and Jack hailed the distinct but complementary talents unique to each of his sons.
“I’m very proud of them, because they give Hidrock an ability to be an expert in lots of different areas,” he said. “So when Abey gets the financing on a building, we’ll get the best rate with the best bank on the best terms. To run a property, Steven’s on top of it, knows what’s going on and knows all the tenants on a first-name basis. I see him walking down the street, and he’s like the mayor. Between that and Eddie, with his construction abilities and knowledge of all the architects, we’ve got it covered. And I play golf.”
The family said that its Herald Square properties are currently at 97 percent occupancy, with tenants including Newsday and Jason Wu, the fashion designer favored by Michelle Obama.
What, aside from its filial nature, sets Hidrock apart from the competition? “We’re not afraid to go in there and put money into a project,” Jack said. “And we’re not afraid to widen our portfolio. It’s always been my angle to add value to anything. We’re not really coupon clippers. We don’t tell partners to just invest money and get a return every year. It doesn’t really work that way. We actively work the project, and every day we think about what we can do to make that project better.”
“As soon as we take over a block,” he said, “the neighbors start trying to copy us. But they don’t know how much attention to detail is needed. They’ll spend $50,000 on a lobby that we’d have spent $200,000 on and think it’s as nice as ours. But it doesn’t come close.”
Any tussles with other development, management and acquisition firms do not seem to be mirrored by sibling rivalries. And Abraham mentioned that he brought his son into the office the day before our interview, perhaps auguring a future generation of Hidarys in real estate. I asked if the business extends to the family dinner table and if family matters intrude on office life.
“We’re always talking real estate,” Steven said. “We eat together, commute together and work together.”
“There’s nothing better than playing with your grandkids and having them around the office,” Jack said, adding that his daughter, Grace, also worked at Hidrock before having three children.
The family’s standards and pride set the Hidrock work ethic. “We don’t just build the average building,” Jack said. “We build beautiful buildings we’d be proud to live and work in.”
A similar mind-set pervades the firm’s hotel undertakings. “We ask ourselves,” Eddied said, “’would we be proud to stay here?”
The Hidarys will get to answer that question when the SpringHill Suites opens this week.
“We’re planning a family stay in the hotel on opening night,” Eddie said. “With our wives, no kids.”
“And then,” Jack said, “the management company will hear from us.”