By Barbra Murray, Contributing Editor
Host Hotels & Resorts Inc. has just struck a deal with Vornado Realty Trust that will bring new prominence to the New York Marriott Marquis Times Square. The two companies recently entered into a lease agreement that lays the groundwork for Vornado to redevelop the retail segment of the 49-story hotel at a cost of approximately $140 million. The property’s coveted signage component is part of the deal, too.
Spanning an entire block in one of the most popular tourist destinations in the entire country, if not the world, the Marriott Marquis is a bit of an attraction in and of itself, featuring over 1,900 guestrooms and approximately 100,000 square feet of meeting space. Under the terms of the agreement, Vornado will upgrade and expand the property’s retail space through a project that will include the transformation of the underground parking facility. The goal: high-end retail.
“If you’re in an area where retail is very high, it definitely makes sense to have retail on the ground floor,” Roland deMilleret, managing director with hotel and leisure industries consulting firm HVS, told CPE. “It makes sense to maximize your retail revenue if you’re in a location like Times Square because that’s the highest and best use on the ground floor; you make more money with retail than anything else. So it makes sense that they are going to revamp the whole retail because there is potential in that area.”
The lease carries a 20-year term and encompasses an option that would pave the way for Vornado to take ownership of the space at a cost based on future cash flow. And there’s plenty of cash flow to be had through the building signage as well. Vornado plans to develop a six-story, 300-foot wide block front signage space. “Signage is also a big thing for those hotels,” deMilleret said. “They generate a lot of revenue from those signs. You definitely want to maximize [its use], so that strategy makes sense.”