Add the Stewart Hotel to list of Manhattan hospitality properties shuttering permanently. 

The 618-key hotel in Chelsea, which was built in 1929, is being converted to a 625-unit apartment building, Crain’s New York Business reports.

The building was acquired by Ray and Jack Yadidi of the Sioni Group and Isaac and Eli Chetrit in 2016 for $213M, Crain's reported. The developers plan on converting the hotel at 371 Seventh Ave. to an entirely market-rate rental building, with amenities including coworking space, yoga rooms and a golf simulator. The conversion is expected to take between 24 and 36 months to complete.

The Yadidis told Crain’s that they hope to keep the hotel open through the end of this year. The hotel filed a notice to the New York State Department of Labor that it expects to close permanently and lay off 158 staff by Oct. 7. Staff secured a buyout via their union, the New York Hotel & Motel Trades Council, which includes several months’ severance pay and priority for jobs in the residential building once it opens, according to Crain’s.

NYC's hotel owners are struggling, even amid bullish predictions on the sector’s rebound from investors and long-term health. Several Manhattan hotels have sold at drastically discounted prices since the start of the year, while city lawmakers mulled over changes to tax laws to subsidize the embattled properties. 

Residential rents, meanwhile, are reaching record highs across the city, with median rents hitting $4K per month in May, according to a report from Douglas Elliman.

Those factors meant that although the Stewart’s owners say they wanted to maintain the property as a hotel longer term, they made their decision based on demand for hotels remaining muted amid soaring demand for residential properties.

"We wanted to keep it as a hotel. It just never panned out," Ray Yadidi told Crain’s. "I think a lot more offices and hotels have to get converted to residential until those prices start cooling down."

The hotel may have an easier time getting its documents lined up for the conversion than others. Many hotel owners wishing to convert their properties into residential buildings may face difficulties with their zoning designation. Gov. Kathy Hochul signed a bill to ease the zoning process for hotel-to-residential conversions in June.

The Stewart’s proposed conversion is by-right, the Yadidis told Crain's, adding that they were close to securing a financing deal for the conversion.

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