Shrager buys lease for Gramercy Hotel

Real Estate Weekly, August 20, 2003 by Heather Klopfer, Linda Barr

The Gramercy Park Hotel--a city institution for over 80 years--looks set to be sold for the second time in just 12 months.

According to a source close to the deal, Steven Greenberg--the current leaseholder of the building, which is owned by the Sol Goldman Trust--is involved in negotiations with German developer, Aby Rosen, and nightlclub owner and hotelier, Ian Schrager, to take over the once glimmering hotel.

"They have made an investment that, depending on other factors, is likely to put them in full control of the hotel," the source told REW.

Although he was unable to provide details of the deal, it is thought to involve several millions.

The Gramercy Park Hotel has been on the wish list of several top hoteliers in recent years. Many view it as an underdeveloped opportunity.

Jeff Klein, owner of the City Club Hotel on West 44th Street, last year told New York magazine, "It's been a dream of mine to own." And restaurateur, Jonathan Morr, who owns the Townhouse Hotel on Miami's South Beach, also attempted to buy the lease several years ago.

Businessman Greenberg, who apparently views the Gramercy Park Hotel as a "rough diamond" is reported to have stated that the new leaseholders will be more equipped than he to transform the hotel at 2 Lexington Avenue.

Although he declined to comment on an negotiations over the lease, Greenberg told REW, "I would never have gotten involved with any hotel property had it not been the Gramercy Park Hotel. I think that Gramercy Park is the one true community in New York City.

"Aby and Ian's resources combined are far greater than mine and I truly think that they will be able to do great things with the hotel and that they have more time to do so than I do."

Greenberg purchased the hotel's lease from the late Herbert Weissberg last October. At that time, he had ambitious plans to turn things around at the 506-room hotel that, in its hey day, was synonymous with the rich and famous.

However, over the past several years, as Weissberg's health failed and his family suffered a series of personal traumas--including the suicide of son David, 45, who threw himself from the roof of the hotel in June 2002--the hotel has struggled to keep up with the new wave in ultra modern hotels.

Since taking over last year, Greenberg has created an exclusive nightclub, The Cobalt, inside the hotel that caters to a very select crowd. Rosen and Schrager--the force behind the famed Studio 54 nightclub and the owner of a string o f Hotels--may well have big plans to drag the rest of the hotel into the 21st century and put it back in the big league that once saw it home to such famous faces as John F. Kennedy, Babe Ruth and Humphrey Bogart.

Schrager, in particular, has a reputation for his high profile boutique hotels.

He enlisted trend-setting designer, Philippe Starck, to create the ultra chic look at The Royalton, on West 44th Street, and The Paramount, on West 46th. He also owns the Hudson Hotel, 356 West 58th Street, as well as seven other hotels stretching from Miami to Los Angeles.

However, with the Gramercy Park Hotel lying just outside the boundary that protects the Gramercy Park Historic District, any major changes may raise a few eyebrows in the neighborhood.

After opening his Cobalt Club, Greenberg had to work with neighbors to figure out a plan to ease the already infamous traffic congestion in the area. An upscale hotel that would attract more visitors--and traffic and noise--could make the situation even worse. Another stumbling block to the plans could be the length of time left on the lease.

It is believed to be due to expire in 2018, giving any new hotelier just 15 years to renovate the property and a chance to attract a high spending clientele.

Insiders have figured it could take at least $20 million dollars to put the sparkle back in the Gramercy Park diamond.