The Race To Buy Hotel Chelsea: A Glance At The Gambit

by Ross Kenneth Urken · January 20, 2011

    Both Andre Balazs and Ian Schrager are thought to have put in bids for the storied Hotel Chelsea, which has an asking price of $100 million. But will the deal really come from New York's hotelier elite or the more mysterious foreign magnates?

    Page Six reports on the new developments in this ongoing saga, citing speculation that Balazs and Schrager, among others, are more formally pursuing this conquest. Of course, the two major issues that make this an unattractive gamble are the burdensome tenants and the renovations.

    The management, with limited success, has been trying to reduce the long-term tenants, who would not only serve as a financial drain with their minuscule rents but also as obstacles to the physical overhaul of the place.

    "Management has already been whittling down the tenants," a source said. "They would go in there and get building permits to renovate the rooms and then make them hotel rooms. They aren't giving out long-term leases".

    Another insider spoke about the Pandora's box of the necessary refurbishing that in and of itself will set the buyer back a pretty penny.

    "It's a complicated deal," said the insider. "The building needs so much work. It's going to cost a fortune to overhaul."

    The tales of sightings and will-he-or-won't-he tension surrounding the purported buyers create narrative tension through the uncertainty.

    Of course, the intrigue lies in imagining how Balazs would reinvent the hotel with his own revery-laden (-addled?) DNA with the hip luxury found at The Standard or the Chateau. Of course the Chelsea comes with the history of its many characters and celeb-frequenters, from Bob Dylan to Andy Warhol, to give it the cachet and New York authenticity appealing to a hotelier looking to expand his grasp on New York.

    Ian Schrager, the brains behind Studio 54 and the Palladium, would seem to find in the Chelsea a nice marriage between the old Warhol New York he cultivated in his early projects and his current Morgans Hotel Group behemoth (with the classy, boutique appeal of the Royalton Hotel and the Hudson Hotel).

    All this said, it's probably best to speculate that given the potential risks of an investment in this fallen hotel and the sunk costs that present themselves from the get-go, it may take a New York outsider to muster up the gumption to seal the deal.

    As we saw last week when the French hospitality company Louzon Group bought the East Village Salvation Army for $7.6 million, it may take an unlikely source with a quirky mission to bring this purchase--and the derelict but prestigious building involved--to fruition.

    Obviously the price differential of over $90 million is substantial between the Chelsea deal and the Salvation Army coup, but someone has to take a gamble. Will the business acumen and better judgment prevent New York's hotelier elite from going for broke?

    [The Chelsea Hotel And The Balazs Revery]

    [Go To The Chelsea Hotel Dressed As Bob Dylan]

    [Stylish Hotel Rises From Salvation Army: A New Kind Of Hand-Me-Downs]

    [Image via CrawDaddy]