Built-in 1907 for an unprecedented $12 million, the Plaza Hotel was purchased by El-Ad Properties for $675 million in 2004. The National Historic Landmark, located at the corner of Central Park South and 5th Avenue, was not even for sale when El-Ad CEO Miki Naftali orchestrated the deal.
The Plaza had been owned since 1995 by a Saudi prince and Millennium & Copthorne, a London-based company chaired by Singaporean businessman Kwek Leng Beng. According to a 2004 New York Times article, the Plaza made $45 million in profits in 2000, yet incurred a pre-tax loss of $1.8 million in 2003. The New York Times quoted Mr. Kwek as saying that El-Ad’s price was “too good to refuse” for the hotel which he acknowledged was in dire need of expensive renovations.
Upon purchase, El-Ad revealed plans to restore the historic interior to its original 1907 appearance while transforming the Plaza into a combination of hotel rooms, condo-hotel suites, private apartment units, and retail space. Renovations of the hotel, totaling $400 million, began in April 2005 and were completed in the middle of 2008.
The proposed renovations for the Plaza did not come easily for El-Ad. While El-Ad’s Naftali disputes the validity of claims that his original plan intended to lay off 900 employees and close the Plaza’s foodservice venues, preservationists and union organizers worked in concert to generate public sentiment in favor of measures to protect the Hotel and its workers.
The Landmarks Preservation Commission (LPC) landmarked several of the Plaza’s interior spaces in July of 2005, including the Palm Court, Grand Ballroom, and Oak Room.
The New York Hotel and Motel Trades Council stepped in to negotiate severance packages for Plaza employees, some of whom had worked there for four decades. After Naftali refused to meet the conditions, the hotel workers’ union leader, Peter Ward, orchestrated the Save the Plaza campaign that enlisted celebrities and Mayor Bloomberg as champions of the site and its workers. As a result of the campaign and negotiations by the Bloomberg administration, 350 jobs were saved as the number of condominiums was reduced to 181 and the number of hotel rooms was increased to 282.
Of the 282 hotel rooms, 130 are conventional hotel rooms managed by the Fairmont Hotel Group, while the remaining 152 are “condo-hotel” suites. The condo-hotel suites are occupied by owners for no more than 120 days per year and then rented out for the remaining 245 days by the Hotel or by the owners.
When the 181 private apartments went on the market, they sold immediately and for record prices – between $4,000 and $6,000 a square foot – despite the purchasers not being able to see the new floor plans. The Plaza’s opulent reputation and the developer’s publicized renovation details, like gold-plated fixtures, attracted scores of super-wealthy individuals. Despite this initial interest, El-Ad Properties has since become embattled with controversy over the apartments and renovations.
Many of the residents have voiced complaints about small windows, obstructed views, buckling floors, damaged carpets, undependable running water, and low-quality finishes like fiberglass moldings, low-density Chinese marble, and wood veneer. In a 2008 Vanity Fair article, critics describe the new Plaza as an exercise in fake opulence that misses the mark on historic elegance while being too bounded by its small spaces and windows for modern design sensibilities.
Lawsuits have riddled the Plaza since its reopening. El-Ad Properties is embroiled in a legal dispute with TPG Architects over work completed for the retail space. Residents and would-be residents have sued El-Ad Properties for reasons related to dissatisfaction with the various qualities of the luxury units among other things. The private units have also experienced an abnormally high number of re-sales, many with prices significantly lower than purchase prices.
The failing economy holds further problems for the Plaza, specifically the Plaza Retail Collection – the 39,000 square feet super-luxury shopping mall set underground the Plaza Hotel.
Due to landmark restrictions approved in 1969 that limit how the building’s façade can be altered, retail space was forced underground in an area of Manhattan with abundant street-level retail. 90% of the retail spaces had been filled by the beginning of 2009, yet there is some concern that because of the current economic times, fewer shoppers will utilize the space. The Plaza’s retail shop owners plan to ride out the downturn, confident they will emerge as an international shopping destination when consumer spending rebounds.
The fabled Palm Court restaurant officially closed in December 2008 due to severe losses, though the venue had already stopped serving meals in August. El-Ad Properties promises that the closure is temporary, though it is unclear how long the recession will prolong investment.
Similarly, the Oak Room closed in February of 2009 due to problems between the head chef and El-Ad. El-Ad plans to renovate the Oak Room, adjust its decor, and revamp the menu to be less expensive. By May of 2009, guided public tours of the Plaza displayed the changes to visitors.
Some real estate commentators project that the positive publicity generated by the tours and the fading controversies of the recent past will boost interest in the luxury units.