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Ira Drukier and Richard Born were bored. Facing an early midlife crisis three decades ago, they decided to ditch their careers in engineering and medicine, and follow their fathers into the real estate business.
The move paid off. The Queens-raised partners have become billionaires by transforming their families’ modest real estate assets into a lodging empire that includes some of New York’s most stylish accommodations. With 24 properties including the Bowery and the Ludlow, they’re the biggest owners of boutique hotels in the city. They also control 12 residential and commercial buildings.
Drukier and Born tend to focus on buying projects in need of extensive renovations. They operate properties through their management company, BD Hotels, and hire different teams of architects and designers for each building depending on their neighborhood and history.
“The aesthetic nature of the hotel business evolved slowly — I’d compare it to jeans,” Drukier, 69, said in a phone interview. “Over time, they’ve become stylized, catering to a very specific group of people. Hotels are more than just a bed and hot water.”
Drukier and Born, 57, are profiting from demand for boutique hotels, which has been one of the fastest-growing segments in the lodging space, especially among younger customers, according to Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia.
The pair has three hotels under construction: two in Manhattan and one in the Williamsburg neighborhood of Brooklyn. They expanded to California in June, paying $30 million for the Cecil Hotel in downtown Los Angeles, a rundown property associated with serial killers and suicides.
Their latest venture is the 184-room Ludlow on New York’s Lower East Side. The property started hosting guests last year after Drukier and Born bought the almost decade-long stalled development in partnership with hotelier Sean MacPherson in 2011 for $25 million. Across the street from Katz’s Delicatessen, the brick-and-glass hotel features Moroccan rugs, grand chandeliers and a penthouse suite that starts at $1,950 a night.
It’s one of more than two dozen hotel properties that Drukier and Born have stakes in, along with the Greenwich Hotel, co-owned with actor Robert De Niro, and the Mercer in SoHo, which they operate in partnership with Andre Balazs.
Their holdings are valued at about $2 billion, according to data compiled by Bloomberg that include room rates, occupancy levels and prevailing capitalization rates in New York City. They own between 40 and 70 percent of their hotels.
Born said their properties have a loan-to-value ratio from 25 to 30 percent. They said they didn’t know the exact value of their holdings.
“Billions on a leveraged basis and billions on an unleveraged basis,” said Born. “It would take a team of accountants to figure out the value.”
Born started his career as a surgical resident at New York University and Mt. Sinai hospitals. Drukier, who has a doctorate in electrical engineering, started a division of Microwave Semiconductor Corp. that made microwave transistors used by the aerospace and other industries.
Both had abandoned their careers for real estate by the mid-1980s. Born called Drukier, an acquaintance through their fathers’ relationship, after he heard that he’d left his old job, and they decided over lunch to form a partnership. Using money from Born’s second career as a commercial real estate broker and proceeds from Drukier’s time at MSC, they bought a Howard Johnson at Newark Airport. They sold it in 2013 for about $28.5 million, according to estimates by property researcher Real Capital Analytics Inc.
Their first major hotel renovation in Manhattan was the Hotel Elysee in Midtown East, which reopened in 1992. A gathering spot for celebrities and intellectuals in the 1940s, and onetime residence of playwright Tennessee Williams, the property inspired them to focus on boutique hotels.
“It was the first hotel that had a bit of a style differential,” Drukier said. “The Elysee was family-owned and had a lot of disrepair. We wanted to include a French flair with lots of yellows and blues.”
After the Elysee, Born and Drukier ventured to a part of Manhattan where their fathers rarely went: downtown.
Their hotels now dot the city’s gritty-turned-fashionable neighborhoods and have interiors that match the surroundings. Rooms at the Bowery on the Lower East Side are outfitted with floor-to-ceiling factory-style windows and Turkish Oushak rugs. At the Jane in the West Village, rooms are called cabins in a nod to the building’s history as a hotel for sailors.
De Niro said in a phone interview he worked closely with Drukier to design “every detail” at the 88-room Greenwich Hotel, helping implement unusual features such as a swimming pool framed with beams from a centuries-old Japanese farmhouse.
“We are talking about doing another Greenwich or Greenwich-type hotel in another city,” De Niro said about future collaborations with Drukier and Born. “But it has to be the right city.”
The billionaires also have applied their design sensibilities to the other end of the price spectrum, with their two midtown Pod hotels. A bright, closet-sized bedroom comes with a flat screen TV, iPod dock and a nightly rate of less than $200.
More big hotel companies have been pushing into the boutique business. InterContinental Hotels Group Plc, owner of the Holiday Inn and Crowne Plaza brands, in December agreed to buy the Kimpton Hotels & Restaurants chain for $430 million. Hilton Worldwide Holdings Inc. said in October it was starting a new boutique brand called Canopy.
“We like to think of ourselves as doing well in both good and bad markets,” Born said. “When the hotel market is busy our properties’ cash flow is much stronger. But because we leave our assets with small mortgages, when the cash flow goes down we don’t suffer.”
Their primary focus remains on Manhattan, a market where asset prices and capitalization rates, a measure of investment yield that falls as prices rise, tend to outperform hotel operations. Investors who would buy their hotels may convert some into condominiums, a possibility that has helped fuel the rise in value, Drukier said.
Born, whose daughter works with him, and Drukier said they would like to pass their empire to the next generation. If that doesn’t work, they said they would rather sell all of their holdings collectively instead of individually.
“Selling one property will not change our lifestyle at all,” Born said. “I’d rather sell them all and sit on an island somewhere.”
With assistance from Caleb Melby in New York.
To contact the reporters on this story: Nadja Brandt in Los Angeles at email@example.com; Devon Pendleton in London at firstname.lastname@example.org To contact the editors responsible for this story: Peter Newcomb at email@example.com Alexis Leondis.
This article was written by Nadja Brandt and Devon Pendleton from Bloomberg and was legally licensed through the NewsCred publisher network.