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Goldberg sells boutique hotels.

Gotham Hospitality Group CEO Bernard Goldberg has sold his five "boutique" hotels to Andy Stone's investment group at Credit Suisse First Boston, but will remain in the hotel business by turning his energy towards larger properties, and is pursuing four other Manhattan projects.

"The challenge is to imbue these larger properties with the detail, amenities and intimate services offered by smaller boutique hotels," Goldberg said. "Boutique relates more to the experience than to the size."

The hotels purchased by Credit Suisse, which will now be operated by Unique Hotels & Resorts, include the 124-key Mansfield Hotel on the tony West 44th Street block that houses the Harvard Club and the Royalton; the 92-key Hotel Wales at Madison and 92nd Street; the 53-key Franklin Hotel on 87th Street between Lexington and Third avenues; the 207-key Roger Williams at Madison and 31st Street; and The Shorham, along with the adjacent West 55th Street building which Goldberg leased last year and planned to renovate to more than double Shorham's current 84 keys to 174.

Sources say the 656-key portfolio carried a pricetag in the mid-$130 million range.

"They bought a collection of hotels that are uniquely situated," said Arthur Adler, managing director of the Lodging and Leisure Group at Sonnenblick Goldman, who was not involved in the transaction. "Bernard Goldberg has done a good job of positioning these properties. He has spent a lot of the risk capital on the renovation and the marketing, so something around $225,000 a key for the renovated rooms is a good price, and is a good deal for both sides."

Goldberg was advised by a team from The Carlton Group, E&Y Kenneth Leventhal and Goldman Sachs, which provided financial advise and procured the purchaser. Howell & Associates acted as advisor to Credit Suisse First Boston.

Howard Michaels, chairman of The Carlton Group, said "These properties had somewhat matured and Goldberg felt it was a good time to sell. He wanted to use that experience to buy larger properties."

Unique Hotels & Resorts, a successor to Windsor Group, is a Los Angeles and New York-based hotel management and development company headed by Eric Prevette and Carlos Lopes. Both are former senior vice presidents of the upscale Rosewood Hotels owned by Caroline Hunt of Dallas, while Prevette was also its chief financial officer.

The two formed the Windsor management company with the Japanese-owned Sazale Group, and from Rosewood acquired and managed the Bel Air Hotel in Los Angeles until they sold their interest in 1994 and formed Unique Hotels & Resorts. They previously managed the Capjaluca in Anguilla, and the Biltmore in Los Angeles.

Prevette and Lopes developed a relationship with Stone and CS First Boston at that time, and were brought into the Goldberg transaction by the CS First Boston group.

The five Gotham hotels are their first assignment in New York, and are intended as a springboard for future expansion around the world.

"We're tremendously excited," said Prevette. "They are great little properties and provide us with a great base to grow on."

Unique Hotels also manages the elegant Rosario Resort on Orcas Island off Seattle, and the Beverly Crescent in Beverly Hills, CA. They will also be managing the very luxurious Cuisinart Resort & Spa in Anguilla when it opens next year.

"That name will take getting used to, but it will be the best property in the Caribbean," agreed Prevette when confronted with the processed food analogies. Cuisinart is owned by Conair and in fact, he said, the hotel concept will be assembled around "food" and "spa."

"There will also be an art gallery, and we are looking at an artist-in-residence program," he said.

Prevette also expects CS First Boston to be seeking more properties, and hopes to manage those. The company actually took over operations of Goldberg's properties on July 1st. "We've been busy," said Prevette, who noted they are keeping all the personnel in place, but have brought in a vice president of operations.

Unique Hotels is also very bullish on the boutique hotel market. "We decided to expand and pull these concepts together on a more national and international basis," explained Prevette. "We want to expand the small hotel idea in New York, and we view this as a base and a flagship from which to expand. The whole boutique concept is one where guests are looking for an identity, and we want to carry forward the Unique name."

The company also expects to make some improvements to the five hotels, including the completion of the expansion of the Shorham, a new central reservations system, and other technological and service upgrades.

"This gives Unique a base of operations in New York with a group of small hotels that is protected from competition, because another large convention hotel is not going to affect them," said Adler. "Many business and leisure travelers prefer these kind of hotels, and I think we will see more of these in New York. Occupancy is in the mid-80's, and I'm very bullish on New York."

Goldberg, a real estate attorney, began his hotel group when he purchased The Wales in 1988. Over the last decade, he continued to purchase small, neglected properties and restored them with an eye towards historical context, reasonable rates and attention to his guests.

But there are several projects that "got away," including a scheme to turn the top of the Chrysler Building into a hotel; a similar conversion of a Fifth Avenue building in Rockefeller Center; and a plan to reinvigorate the Downtown Athletic Club by turning it into the Hotel Heisman - a plan that others tried to fulfill, but ended up in a court battle with the Club's members.

Goldberg had just begun converting a former residential building-turned-office property into the railroad-themed Hotel Grand Central when it was purchased by Blackacre Capital. Coincidentally, that hotel will open August 7th as the Fitzpatrick Grand Central Hotel - with both the railroad and Irish pub themes.

Adler says investment bankers are always looking towards their exit strategy. With a hotel, for instance, that could be accomplished through a later public offering, re-funding through a more traditional debt source, or by merging several companies.

"It's not unlikely that they are establishing a relationship with Unique for other purchases," Adler added.
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Title Annotation:Gotham Hospitality Group CEO Bernard Goldberg
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Jul 15, 1998
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