New York's famed Waldorf Astoria hotel is struggling to complete its plan for converting hundreds of guest rooms into luxury residences, a process that is shaping up as one of the largest, most intricate and priciest condo conversion and hotel rebuild projects undertaken.
China's Anbang Insurance Group Co. bought the Park Avenue hotel for a record sales price of $1.95 billion in 2015, vowing to deliver some of the most luxurious and exclusive residences in the city.
In 2017, Anbang closed the more than 1,400-room property to begin a four-year transformation of the landmark building into a smaller hotel and condominiums.
Now, five years later, the project still isn't completed and could well continue into 2024, according to people familiar with the matter.
Conversion costs have also ballooned and are expected to top $2 billion, or as much as a quarter higher than the initial internal estimates, these people said. That would put the combined acquisition and conversion costs at more than $4 billion.
The pandemic, global supply-chain issues and rising material and other costs have slowed major construction projects throughout New York City.
But the Waldorf had some unique issues that also contributed to delays and cost increases. That includes complexities related to demolishing rooms and rebuilding the nearly century-old hotel, which as a designated landmark building has to follow certain preservation rules throughout the process.
The Chinese government also effectively took control of Anbang in 2018 after its chairman, Wu Xiaohui, was found guilty of a variety of financial crimes related to fraud and abuse of power and sentenced to 18 years in prison.
A rotating cast of other Anbang executives tried to redesign the project or change strategy while Mr. Wu was detained, and progress stagnated, according to people familiar with the matter.
The latest casualty of the cost overruns was the chief executive of the U.S. subsidiary of Dajia Insurance Group Co., which has taken control of the Waldorf property and other Anbang assets.
The American CEO Andrew Miller left the firm last week and no successor has been named, people familiar with the matter said.
Executives at the Chinese parent company and the American CEO were at odds over the cause and magnitude of the cost overruns, according to people familiar with the matter.
The Waldorf's historic significance and rich past have generated a lot of curiosity about the property's future. The art deco building was one of the largest luxury hotels in the world when it opened in 1931. By the time it was sold to Anbang in 2015, every president since Herbert Hoover had stayed there.
The Waldorf has also been a New York City home to celebrities from Gen. Douglas MacArthur to Frank Sinatra and Marilyn Monroe. The Duke of Windsor stayed there after he abdicated his throne to marry American socialite Wallis Simpson. Hotelier Conrad Hilton, who acquired control of the property in 1949, once scribbled on a photo of the hotel that it was "The Greatest Of Them All."
More recently, the hotel has struggled to live up to its legendary history, and some guests and hoteliers said an upgrade was long overdue.
When the property reopens, it will feature 375 guest rooms and 375 residences. Prices start at $1.8 million for a studio apartment and soar to tens of millions of dollars for a penthouse.
Residents will have separate entrances and amenities from hotel guests, including a 25-meter Starlight Pool overlooking Park Avenue.
Luxury real-estate agent Donna Olshan, whose firm Olshan Realty Inc. publishes a weekly report on luxury Manhattan residential transactions, said the Waldorf hasn't reported any sales to her.
Sales might be challenged by a lack of foreign buyers, who have yet to return to the city in large numbers since the pandemic, she said.
"Now we don't just have Covid, which people have gotten used to, we have war. Inflation. Rising interest rates. And China is all upside down," Ms. Olshan said. "When you put that cocktail together, that can be daunting for a developer."
Douglas Elliman, the real-estate broker marketing the condos, said in March that agents representing buyers could collect their commission once a contract was signed.
Typically, brokers receive their commissions when a sale closes. That move was meant to provide an incentive to buyer brokers who may have been put off by having to wait for the project's completion, say people familiar with the matter.
Dan Tubb, who oversees residential sales at the Waldorf, declined to offer specific figures. But he said that April was "probably the busiest month we've had."
The 3% commission upon contract signing boosted broker traffic by about six times over the monthly average and doubled sales appointments compared with March, resulting in "numerous signed contracts," he added.
Kemdi Anosike, a broker with Coldwell Banker Warburg, has an accepted offer for his foreign client and is hoping to sign the contract by the end of this week.
"The location is great," he said. "I think what a lot of people are buying in the Waldorf is nostalgia and what the name represents: luxury and what New York was known for back in the day."
