Rochester Business Journal

The new owners of the Strathallan Hotel hope to open for business in August after gutting and modernizing the nine-story building. They also plan to buy an apartment complex next door to help spruce up the location.
 
"We're very excited," said Robert Morgan, CEO of Morgan Management LLC in Perinton.
 
"We think it's going to be a great hotel for people that come to events in that area and come to all the festivals that are going on, and for people that want to stay close to downtown.
 
It's just a great area."
 
The Strathallan has been closed since February while the work is done.
 
"We have a lot to do," Morgan said.
 
The addition of a pool on the first floor, three large suites on the ninth floor and a park area on its East Avenue lawn are among the upgrades. The hotel will have 155 rooms, an increase of four. Room rates have not been determined, Morgan said.
 
Morgan Management and partner Christa Development Corp. are spending at least $10.59 million to overhaul the hotel and rename it Strathallan Hotel, a DoubleTree by Hilton Hotel, part of the Collection Group.
 
"That's a lot of money, but the interesting thing about it is that hotel has a brilliant location," said Edward Hall, president and CEO of the Greater Rochester Visitors Association Inc., which does business as VisitRochester.
 
"It's right in the museum district, and it's in a great part of town. And to be honest, it needed a renovation. To do things like put an indoor pool in, which really is a unique retrofit to a building like that, is significant in offering new guest amenities."
 
Christa is involved in construction and renovation. Morgan is responsible for the finances. Norbert Hausner is the architect and designer.
 
The $10.59 million price was included in an application for tax breaks with the County of Monroe Industrial Development Agency, but the cost likely will be more than that, Morgan said.
 
The entity 550 East Avenue LLC was approved for tax breaks of $507,098 by COMIDA in February. The agency projected community benefits of $837,553 through new or retained jobs and property and sales tax revenues.
 
Morgan would not disclose an updated project cost.
 
"We're spending more money than we wanted to, but we took this thing down to the concrete," he said. "We're turning this into a brand-new hotel."
 
All nine floors and the guest rooms were gutted, Morgan said. A ninth-floor bar has been removed and replaced by three 900-square-foot suites with fireplaces in the master bedrooms and a conference center for corporate events.
 
In addition to the first-floor pool, a two-level fitness center has been added, Morgan said.
 
The hotel restaurant will have a new look and a new third-party operator. Morgan would not identify the new operator because a contract has not been signed.
 
"We'll be serving three meals per day," he said. "It'll be a slick operation-seafood and steak. It'll be a beautiful restaurant when it's all done."

Acquisitions
The Christa-Morgan partnership purchased the Strathallan for $4.8 million in December. Florida-based Driftwood Hospitality Management LLC was the previous owner and operator. Driftwood had bought the hotel in 2007 from local owners John Summers and Charles Constantino for $11.4 million.
 
The 2.19-acre property is assessed at $8.3 million, Monroe County records show.
 
Christa-Morgan is negotiating to buy the apartment complex at 520 East Ave. That property is assessed at $1.1 million under the ownership of LJK Holdings LLC, county records show. The complex, containing 41 one- and two-bedroom apartments, was built in 1940.
 
"Their parking lot adjoins this parking lot," Morgan said. "We're just cleaning that whole back section up. It'll look like a park when you go back there. It'll be a beautiful setting."
 
No major changes are planned for the apartment complex.
 
"The building stays," Morgan said. "They had a garage back there. We're just cleaning it up. We're putting in new brick veneer on the lower part of the Strathallan. We'll put it on the garage as well. Everything will blend real well in the back.
 
"We just wanted to blend both parking lots together. They're separate parking lots, but kind of blend them together to a point where it looks really nice."
 
The land between the Strathallan and East Avenue will become a sitting area, with a concrete patio under construction, Morgan said.
 
The hotel will be enhanced by its affiliation with Hilton Worldwide, owner of 3,800 hotels in 91 countries. Its portfolio of 10 hotel brands includes Hilton, DoubleTree, Embassy Suites and Hampton.
 
"We feel that with Hilton and the DoubleTree brand, it will bring a lot more people to the hotel," Morgan said. "People that know it from the Strathallan will come, and people that don't know it from the Strathallan will come just by looking at it through a computer and make the reservations to be in Rochester."
 
The national network will help, Hall said.
 
"Becoming a branded hotel will help them a lot because they will benefit from the national reservation system," he said. "As an independent, as just the Strathallan, they didn't have that sales muscle on a national basis. That will really help their occupancy."
 
Chili-based Essex Hotel Management LLC will operate the Strathallan.
 
"It's especially unique from the standpoint that it's a new renovation of an existing facility, which presents its own sets of challenges," said Essex CEO and chief financial officer Jerald Eichelberger.
 
"You have to deal with what's there, but the concept that's been come up with is really fantastic from the standpoint of what's being done to redo the hotel entirely."
 
The Strathallan will be transformed into a top-tier hotel, Eichelberger said.
 
"We think there will be a strong corporate client base, plus a strong attraction for leisure business," he said. "The East End is a great location. It's right in the middle of the cultural district.
 
"In the summertime, we'd expect to get a lot of leisure business focusing on the cultural district and the wine country in New York. People come to Western New York to enjoy the seasons."
 
Essex also oversees the Hampton Inn-Webster/Rochester, a Best Western in Victor, the Air Park Office Building near the Greater Rochester International Airport, and the Meadows of Geneseo student apartments near the SUNY College at Geneseo.
 
It manages two Microtel Inn & Suites in New York, one in Georgia and another in Virginia. It also manages a Hampton Inn & Suites in Virginia.
 
Essex is responsible for the Strathallan's furniture, fixtures and equipment, Eichelberger said, making sure they comply with Hilton's standards for its DoubleTree hotels.
 
Essex also is responsible for the hotel staff, including working with marketing and sales teams.
 
"The restaurant and bar will be a third-party operator, so we will not be operating that," Eichelberger said.
 
"But there will still be a lot of coordination between the two sides because it is a bar and restaurant within a hotel. Consequently, room service and the like have to be coordinated to meet Hilton's standards."

Inns and outs
The Strathallan is one of two East End lodging facilities on the upgrade. Developer John Billone Jr. is redeveloping 384 East Avenue Inn & Suites at the northeast corner of East Avenue and Alexander Street.
 
Billone wants to turn 58,437 square feet of hotel space into 46 suites and 66 regular rooms. A 10,000-square-foot commercial building on the 2.38-acre site would be subdivided for three tenants after being renovated.
 
The two East End projects will be good for the neighborhood and a good supplement to the Hyatt Regency Rochester, the Radisson Hotel Rochester Riverside and the Rochester Plaza Hotel downtown, Hall said.
 
"It helps us with good, quality overflow space when we have a full situation at the three convention-center area hotels," he said.
 
"In our business, you have to keep reinventing yourself. You have to push money back into these properties. Luckily, our owners have done that. I'm really glad to see these two properties, because they are in a great neighborhood."
 
Another hotel is in the works for downtown, a $15 million Hilton Garden Inn proposed for East Main Street. The 107-room midpriced hotel would be next door to the Hyatt.
 
"It is problematic as to whether it will grow the market or raid the existing properties," Hall said. "I think that's a fair statement that anybody would agree with, whether it's the new developer or the existing properties. It's just very difficult to know."
 
The Hilton Garden Inn is targeted to open in 2013.
 
"We have a good mix of price points downtown already," Hall said. "It's not like we're in New York City where we're getting $600 a night.
 
"Anytime you can add to product, it's probably a good thing because it sharpens up the competition that's in place. But if it's not going to grow the pie and is just going to further divide the market, that's a little problematic for the existing operators."

6/15/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.