The Wal Street Journal: A Supertall Modular Hotel Is Going Up in Manhattan, If the Rooms Ever Leave Brooklyn
The ambitious modular hotel’s future now looks uncertain
By Konrad Putzier
June 8, 2021
The world’s tallest modular-construction hotel was created to rise 26 stories over Manhattan. The guest rooms were built in a Polish factory and arrived fully finished in New York, where they would be stacked in a matter of weeks.
Instead, more than 100 premade hotel rooms have spent months marooned on a dock in Brooklyn, covered in waterproof membranes to shield them from rain.
The developers—who started off in the fashion-accessory business before becoming hoteliers—initially said they hoped to open the 360-foot-tall hotel by the end of last year. But Covid-19 upended those plans, causing construction to grind to a halt last spring and leaving a foundation but not much else. More than a dozen contractors have filed liens against the property over unpaid pills, public records show.
The ambitious modular hotel’s future now looks uncertain. The owner is trying to raise additional funding to finish the roughly $80 million project, according to a person familiar with the matter. That is proving difficult at a time when many lenders are shying away from hotels, especially in big cities, as the lodging industry continues to suffer from a lack of corporate travel.
The project is an important test case for modular construction. The process of building entire rooms in a factory and then stacking them on top of each other at a property site has existed for decades. But it has experienced rising interest in recent years, as developers look for cheaper, faster ways to build amid soaring construction costs.
The process is faster and less prone to accidents than doing all the work on a construction site, saving money by enabling a property to open for business sooner than if it had been built through traditional means.
Any additional costs “can then be offset through profits,” said Sanat Patel, chief lending officer of the project’s mortgage lender Avana Capital, during a 2019 panel discussion about modular construction at a hospitality conference.
But some early modular-construction projects have struggled with leaky facades, delays and other issues. A 32-story modular apartment building in Brooklyn, for example, took four years to build amid delays and a dispute between the developer and the construction firm.
The modular hotel, which will carry Marriott International Inc.’s AC Hotel flag, is a product of globalization. The rooms were put together in Poland, with some parts from North America and Asia.
The rooms are roughly the size of a small bus. Each one has a couch, a bed and a television, say people who have inspected them. Only soap and towels are missing for guests to check in. The first boatload of modules arrived in New York last summer and two more shipments followed. A fourth and final shipment is scheduled for the near future, which would bring the total room count to 168.
For the family that controls the developer, 842 Enterprises Inc., the delays have slowed the clan’s rapid rise from wholesale to Manhattan real-estate moguls with property in a booming neighborhood. Kang Moon Chun and his wife Gil built a business importing and marketing handbags from Asia, eventually bringing in their sons Philip and Robert, according to court records.
Like many other small businesses, the Chuns moved into the once-cheap and run-down area between Union Square and Midtown Manhattan. They bought two commercial buildings there in the early 1990s, property records show.
Over the following decades, as the number of annual tourist visits to New York doubled, the neighborhood became more expensive. Developers started building budget hotels on nearly every block, looking to profit from proximity to the Empire State Building and Madison Square Garden. Those, like the Chuns, who had bought properties before the boom found themselves suddenly sitting on a gold mine.
In 2015, the family opened a 135-room Cambria hotel at one of their two properties, on West 28th Street. In 2019, they went public with plans for the modular project. A year earlier, a 19-story modular hotel had opened in the Lower East Side, and the Chuns’ project would surpass it by seven stories.
“The world’s tallest modular hotel in one of the world’s greatest destinations will act as a game-changing symbol to ignite even greater interest in modular among the real estate and lending industries,” Marriott’s then-chief development officer for Select brands in North America, Eric Jacobs, said in a statement at the time.
Marriott didn’t immediately respond to a request for comment.