FORTUNA REALTY GROUP
Welcome to Hospitality
By Jan Wilson
Since 1874, The Garden City Hotel has welcomed dignitaries and celebrities to Long Island with its signature blend of luxurious lodging and genuine hospitality. Now, after a century and a half, the hotel is getting a restoration befitting its storied past, thanks to the operational acumen and financial strength of Fortuna Realty Group, its new owners.
Fortuna Realty Group is a fully integrated real estate company with a proven track record in acquiring, developing and managing hotels and other properties in New York City, Los Angeles and the Caribbean. Building on its success with the Hotel Indigo Chelsea, the SoHo Hotel and the Dylan Hotel in Midtown, the firm now has several new projects in the pipeline and will continue to explore the New York City area for opportunities to develop other four- and five-star full-service properties.
Executives of the firm say that it is Fortuna’s entrepreneurial culture, sound financial structure, track record and ability to invest opportunistically is what sets it apart from others. “We want to establish Fortuna as a major player in this industry and we have the financial wherewithal and expertise to do so,” says Morris Moinian, President. “We have several billion dollars in hotel properties under development and are anxious to make our mark in New York.”
The Founder’s Drive
Moinian came to the United States from Iran in 1976. “He wanted to emigrate for the opportunity to have a better quality of life,” says his son Nicholas. “With limited English, he started forming the companies that would lead to his first major business success.”
Moinian began his business career in 1979, as president and co-founder of Chattanooga Manufacturing Inc., an international women’s apparel supplier to retailers such as Macy’s, Marshalls, JC Penny, and Sears. Under Moinian’s leadership, the company grew both organically and via mergers and acquisitions of major competitors.
In the 1980’s, Moinian began investing his earnings from Chattanooga in real estate. His key strategy was to acquire ‘on-the-avenue’ or ‘corner mixed-use assets’ with a geographic focus on Manhattan’s Upper East and West Sides. “We looked for residential above retail with future development potential,” Moinian says. In 1995, Moinian fully transitioned into real estate and set his sights on the hospitality sector, developing and managing hotels and resorts in New York, Florida the Bahamas and the U.S. Virgin Islands.
A Fully Integrated Firm
Fortuna Realty Group prides itself on being a fully integrated real estate investment company, with the ability to buy, build, operate, finance and manage properties. The firm has amassed a hotel portfolio of over 2,000 rooms, with an additional 3,000 in the pipeline and has worked in partnerships with Wyndham Worldwide and Intercontinental Hotels Group PLC.
In 2007, Moinian opened a new division of the company—Fortuna Funding NY, LLC—to originate, acquire, and manage short-medium term mezzanine, bridge, and junior/senior participation debt. The company leveraged its position as a fortified development firm to provide loans to development sites in Manhattan. Fortuna’s footing as a real estate investor reduced the company’s risk in the event of a default. All of the notes Fortuna originated have since been repaid and the company continues to actively look for investment opportunities.
“This is a company with a great base of assets,” says Ashish Lall, Director and Head of Acquisitions and Asset Management. “We can leverage that foundation to seek additional opportunities for strategic growth.” Lall came to the firm last year after stints at Cantor Fitzgerald and Credit Suisse, drawn to its ‘entrepreneurial culture,’” he says, adding, “We are successful while still being very lean. We have attracted some of the top people in the industry and they are going to make great things happen.”
The team that Moinian has recruited includes savvy financial professionals who can grow the firm despite a challenging market for financing. “This is a great time to be in the hospitality asset class,” says Robert Gaeta, Chief Financial Officer, who notes that the firm is looking for senior financing as well as equity partners for its transactions. With over 25 years in the construction and real estate industries, Gaeta came to Fortuna last year from The Carlton Group, where he was Vice President and Controller, responsible for asset managing its $500 million real estate and loan portfolio.
After obtaining his Master’s Degree in Real Estate Development in May 2012, Isaac Abraham joined Fortuna as Associate of Acquisitions and Asset Management, responsible for sourcing new development, redevelopment and adaptive re-use acquisition projects for Fortuna. He says that new submarkets for hotels are developing rapidly while overall demand in New York City remains strong. “We see great potential in markets like downtown Brooklyn, Hudson Yards and Midtown East,” he says.
Fortuna executives say that what makes the firm different is its ability to handle all aspects of bringing a project to completion. “Many people can do two or three of these but not all,” says Moinian. “Investors trust that we can do everything needed to develop the property and also manage the hotel for the long-term.”
The flat operational structure and lack of bureaucracy means that the firm is quick to seize opportunities in a strong and growing hospitality market. “We have seen such an increase in tourism to New York City in the last half dozen years and as the city has continually improved office stock coming on line, more companies are expanding their footprints,” says Abraham. “That means more demand for hotel space.”
The firm continues to own and operate residential properties and is always looking for good investments in residential, mixed use and commercial properties in the New York region. In all market sectors the firm seeks value-add opportunities whether in major renovations or ground up construction, especially in underserved locations. “Our hotels are in the right places,” says Joseph Iskander, Financial Controller of Hotel Indigo. “Whether it’s TriBeCa, Garden City or Midtown, we are able to capture the business and leisure markets. We have the right team looking at the right criteria and coming to the right decision.”
The firm is interested in properties that are at least 35,000 SF of developable area, including air rights. It would also pursue already operational hotels of 100 keys or more inside Manhattan or 300 to1,000 keys in the five boroughs.
“We are willing to look at several different options depending on what is available and the possibility of financing,” says Gaeta. Adds Lall: “When we look at distressed assets we are often asked to add a personal guarantee to create a more desirable transaction for banks or other funders. Few firms have the ability to put their own money on the line or enough of their own money at risk to make sure that the deal goes through. We can and we do.”
A Storied Hotel
As the hotel that welcomed Charles Lindbergh the night before his historic trans-Atlantic flight, the Garden City Hotel has a reputation as a stylish address for vacations, banquets and receptions, as well as for business travelers. Fortuna is looking towards positioning this storied asset for the 21st century and beyond.
When Alexander Turney Stewart founded the Village of Garden City in 1869, The Garden City Hotel, opened in 1874, was to be the focal point of the community and was designed to attract the attention of the world’s elite. In 1886, the property was willed to Stewart wife’s family, who formed The Garden City Company to operate the hotel. Her brother-in-law, renowned architect Stanford White, was elected to the board of The Garden City Company and his famous firm—McKim, Mead and White—was contracted to redesign the hotel in the Dutch Colonial style. A distinguished cupola, fashioned after Philadelphia’s Independence Hall, surmounted the entire structure and the eastern and western wings were added. This second incarnation of The Garden City Hotel was opened to the public in 1895. A nine-hole golf course was unveiled in 1897, which later became the Garden City Golf Club.
Just two years later, the hotel was consumed by flames. Although no one was hurt, the structure burned to the ground. It was rebuilt in the Georgian revival style, and this third and most famous incarnation was also designed by McKim, Mead and White, and opened on the same site in 1901. The hotel was expanded a decade later and then again immediately following World War II. The Nelkin family had owned the property for more than 30 years.
Located just 15 miles from Manhattan and 25 minutes from the two major New York City airports, the award-winning property contains 280 oversized guest rooms, 16 suites and four penthouse suites. Its amenities include 16 function rooms, extensive meeting services, and a large health and fitness center. Fortuna will keep the property open through a renovation, including a new look and a new full service spa. Grady Colin, General Manager, says that the history of the property and its special place in the community make it unique. “People come here waiting for the magic to happen,” says Colin, who came to the property after a 28-year career at major hotel brands including Marriott and Hilton. “They are looking for an experience that they can’t always quantify. There’s a reverence about this hotel, and that’s why it stands in a class of its own. It’s very important to the residents of Long Island that this hotel is here.”
Jerry Rizzo, the Director of Food & Beverage and Catering, knows this firsthand, living in and growing up on Long Island. “What drew me to work with Fortuna was the opportunity to be entrepreneurial and bring a hotel known for style and service back to its former luster, with important updates for the business and leisure traveler,” he says. “We have adaptable service that recognizes that we have many business travelers during the week and over 80 major social events per year during the weekends. We can tailor the experience to both groups.”
Now the team is working on operational efficiency as well as capital improvements to the property. “We are going to offer the finest service as appropriate for this style of property,” says Colin. “The employees here take great pride in what they do and we will continue to streamline their service and offer a ‘hassle free stay’ to our customers. We will build the great image of this brand.”
1150 Avenue of Americas (the Pan American Magazine building) is a 100-year-old, eight-story office and retail building that Fortuna acquired last March and will develop into a 400-room hotel within the next several years. “This will be the first new hotel on the avenue between 39th Street and 54th Street,” says Andrew Simpson, Director of Construction and Development. The building is in the design and pre-development phase, being refashioned as a 37-story, 5-star luxury hotel. The total development cost is expected to be around $140 million. The building’s longtime owner was Pan American Magazine Publisher Farris A. Flint, who created the Americas Association in 1941, and performed the dedication at the renaming of Sixth Avenue to the ‘Avenue of the Americas’ in 1946.
Between West 44th and 45th Streets, the property is ideally situated near Rockefeller Center, Bryant Park, Times Square and the Diamond District,” says David Duvoisin, Associate. “This area is clearly underserved as the New York City tourism market has continued to grow.“ Adds David McManus, General Manager of SoHo Hotel: “The number of hotel rooms in the City has grown to 130,000 from 90,000 in the last four years, but overall occupancy has not decreased. The fact that demand remains high while the city has added 50% more rooms shows how robust the hospitality market is right now.”
The Hotel Indigo Chelsea, at 127 West 28th Street, was developed and is managed by Fortuna Realty Group. It opened in October 2009 as the flagship hotel for The Indigo brand of the <b>Intercontinental Hotel Group (IHG) <b>. “The hotel is well situated in the Chelsea sub-market among many local attractions,” says Bill Mehalco, General Manager of Hotel Indigo Chelsea. “It quickly became a very profitable hotel and emblematic of the brand that IHG wanted to build.” Adds Simpson: “IHG wanted to use this hotel as a case study for the Hotel Indigo brand. Each of these properties are designed to be trendy yet blend seamlessly into the local neighborhood.”
The Hotel Indigo stands 20 stories with an upscale rooftop bar and lounge and 124 hotel rooms. The hotel appeals to vacationers as well as business travelers coming to do business at Google or one of many other tech companies in the immediate area, which is why the hotel provides an efficient experience for that segment of the market. “All of our technology is up to date—accessibility to Wi-Fi and other connectivity is crucial to the experience,” says Mehalco. People now want a ‘crisp’ experience—trendy and sexy but without elaborate design or unnecessary frills.”
The hotel was built with only two suites, based on research that shows that visitors are more interested in an efficient stay than in purchasing a room that is much larger than a standard one. “Suites that take up twice the space can’t be sold for twice the price,” says Iskander, “so it makes more sense to take all of the amenities that you would have in a suite and simply put them in a standard room. We will be following that model in our other hotels as well.”
SoHo Hotel, at 523-525 Greenwich Avenue, between Spring and Vandam Street is being developed jointly with Matthew Moinian as a 50,000 SF, 20-story luxury boutique hotel. Fortuna is currently in talks with a hotel brand and will manage the property, which will have 120 rooms and two penthouse suites, in house. The hotel is being built on a former parking garage site and will be designed by Japanese architect Nobutaka Ashihara. “Demand for SoHo is enormous,” Moinian said. “That area’s booming and it’s only going to get better.”
The hotel will include a large restaurant, gym, conference spaces and a spa. There will also be a double-decked roof top bar. “This hotel will appeal to both the business traveler who wants a trendy experience and the visitor who wants to be in the heart of the action,” says McManus. SoHo Hotel is scheduled to open next year.
27 West 38th Street is a development site that was acquired by Fortuna in December. Located between Fifth and Sixth Avenues, this project is currently in the pre-development and design phase for a 72,000 SF, 27-story, 170 key luxury boutique hotel. “The challenge of this property will be figuring out how to maximize the square footage,” says Simpson, “as well as aligning the development timeline with easing the transition of current tenants to new space.” The property will include a restaurant, business center, fitness center, spa, rooftop bar and lounge, and observation deck.
Acquired in 1997, Fortuna Realty Group redeveloped 52 East 41st Street into the Dylan Hotel, a 108-key luxury boutique hotel. As part of the redevelopment process, four stories were added while maintaining the original 1897 Beaux Arts design. Formerly known as The Chemists Club, this asset was opened in 2000 and includes the famous Benjamin’s Steakhouse. This hotel was sold in 2007 for $78 million.
Sugar Bay Resort and Spa is a 294-key, 36-acre oceanfront hotel located in St. Thomas, U.S. Virgin Islands. Acquired in 1996, this all-inclusive destination includes many luxury amenities and is a destination for couples and families.
In partnership with the restaurateur Giuseppe Cipriani and Atlantic Pearl Investments, Mr. C’s Beverly Hills Hotel, is a 140-room, 5-star hotel with upscale amenities located on a prime high-end corner on West Pico Boulevard.
The firm also owns a 13-story office building at 60 Madison Avenue, adjacent to Madison Square Park as well as residential holdings throughout Manhattan.
Although hospitality development remains a core focus, Moinian is a savvy entrepreneur and recognized the tremendous potential of investing in the lifestyle fitness industry. As such, he has partnered with a young entrepreneur, Sylvan Garfunkel, to launch Revolve Fitness Centers, an operator of unique indoor cycling studios looking to build their brand in the New York City and Washington, DC areas. “Our first studio opened in Arlington, VA in 2011 and then we opened a studio last year in New York City near Union Square,” says Sylvan Garfunkel, President. “We are actively pursuing more locations and have plans to expand nationwide.” Revolve offers unique cycling experiences that incorporate cycling and strength training for fitness enthusiasts.
Voted “Best Spin Studio” by New York Magazine in March, Revolve features instructors with celebrity followings offering a variety of classes for seasoned exercise veterans as well as novices. “Reviewers say that we bring something unique to the marketplace because of the expertise of our instructors as well as structure of our classes, which are designed to give participants a great workout every time.”
Fortuna’s executives believe that as the effects of the recession continue to fade, the hospitality industry will continue to strengthen and hotels in New York will enjoy steady demand. “Morris Moinian understands hotels from a lifestyle perspective,” says Colin. “He knows best practices and understands how to adapt them to the kinds of hotels that he owns. He also understands how to offer the kind of experience that keeps guest coming back through knowing their preferences and offering a completely seamless stay.”
Among the more than 3,000 keys under development is a 77-acre site in Kissimmee, Florida situated one minute from Disney World’s front gates. This exciting development will comprise four million square feet of residential, hotel, retail, and entertainment space.“We are creating a buzz now as the industry realizes that there are few who can do what we do—-take a project from site development to the opening and management of a magnificent hotel property—all with the fantastic team of professionals we have assembled here,” says Moinian._