It’s not a good week for gay real estate: First we told you about the alleged sale of Fire Island Pines’ famed pavilion. Now it appears the Out NYC, New York’s brand spanking new gay urban resort, is still looking for investors.
Our sister in gossip Michael Musto posted an email he was sent from someone invited to invest shortly before the hotel’s ribbon-cutting on March 1:
“Now that XL Nightclub is open and has exceeded expectations, with the hotel opening on March 1st, and recently an abundance of favorable press, a handful of our investors have increased their investment in recent weeks.
“Additionally, we have had numerous unsolicited inquiries about investing that we have since our last round closed. Although we are fully funded, as a result of this wave of investor interest, the Sponsor (Ian) is willing to slightly reduce his large exposure at his cost for diversification reasons. I wanted to reach out to you once more to see if you have any renewed interest.
“Investments in the project have ranged between $100K and $1MM. We are offering the exact same deal terms as last year (including a waived sponsor promote until you get all your money back) with an obvious much smaller amount of risk associated now that the project is fully funded and successful.
“New investors will come in as preferred equity investors with a 10% preferred dividend plus a guarantee of all money back before the Sponsor gets any promote. Over the 8 years that we have projected out cash flow, we expect cash returns with low leverage to average in the teens.”
We’re not real-estate mavens (please, we can barely afford the rent on our shoebox studio in North Siberia), but if you’re fully funded and doing gangbusters, why do you need to hustle for more investors?
We attended the Out NYC’s grand opening at the beginning of the month and, while we were impressed with the space overall, major portions of the hotel weren’t completed—even though it was already welcoming guests.
XL, the nightclub portion of Out NYC that opened earlier this year, has had some issues as well: While the weekend parties have been drawing massive crowds (and already spawning noise complaints), weekday events have been less successful—leading to parties starting up and shuttering in a matter of a week or two.
We hope these are just growing pains for this daring venture.
Photo: JJ Keyes