His [Chang's] building is done through Tritel Construction, where he is a 50% partner. In his customary suit and tie at a desk in his "second" office at Tritel, Chang punches in a few numbers on a calculator, his diamond-encrusted watch glittering. "I sold a lot of hotels," 22 in all, he says. Unlike many serial hotel entrepreneurs who tend to reinvest 100% of their capital gains under Internal Revenue Code Section 1031, which shields such gains made while trading up on properties, Chang keeps 20% for himself. "That's how I built up my cash," he says. He puts his kitty at about $200 million.
But, he rues, "I made several partners very rich." Hotel operating margins have improved in New York's post-9/11 recovery, so now Chang has changed gears again. He's keeping most of the 20 properties under his wholly owned McSam LLC.
... A tight market is fine for Sam Chang. His secret, he says, is a knack for spotting feasible sites for new, midsize, medium-range hotels in a city like New York, which is considered a saturated and high-barrier-to-entry area. The first Comfort Inn set the mold--it was 25 feet wide in front and only 13 feet in back, and he built it 15 stories high. In the financial district he's now building 20 floors on a plot 20 feet wide.
... he also is willing to buck established labor practices, and that has invited trouble.
Starting in April (NOTE: See Village Voice, "Labor War in Chelsea", June 2006)
brewing tension at three Chang hotel construction sites erupted in altercations with picketers protesting Tritel's use of nonunion labor, unusual on major Manhattan jobs. A carpenters union local, trying to organize what it says is a crew inadequately trained in safety measures and unevenly paid, contends its reps were roughed up by a subcontractor's men. (There were arrests on both sides; Tritel says no operations have been cited for labor infractions.)
"We can build a hotel in New York City only if we can get a good rate," says Chang.
"The union was quoting a price of $400 per square foot, and we're building with $250 per square foot
." He says a larger project ahead might offer the scale to afford a union crew, "but they try to force us to give them these small jobs."
For 2006 Chang estimates gross revenues for McSam and other development arms plus his half of Tritel at $380 million. At the top of his game in New York but still a single man, he figures he will keep up this frenetic pace for five more years and then slow down. That's subject to changing market conditions, of course.