Word is out...From Saturday's Star:
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Charles Khabouth is no stranger to rolling the dice when it comes to churning out new ventures aimed at fickle consumers.
As Canada’s largest nightclub operator he is an established brand, the most powerful man in Toronto’s entertainment district. A pope to the city’s night denizens hopped up on lychee martinis and techno.
But his latest project is his biggest gamble yet. And this time he’s put his name on it.
Khabouth is building a $150-million hotel and condominium named Bisha. That’s short for Bishara, Khabouth’s childhood name.
You can hardly miss it. A giant billboard emblazoned with his logo is already planted at 56 Blue Jays Way, the original home of the Second City comedy troupe in downtown Toronto.
The size of the venture begs the question: Khabouth has conquered the club world, but can he succeed in North America’s toughest condo market?
Torontonians are spoiled for choice when it comes to boxes in the sky. In the second quarter of the year the city had 272 condominium projects on the market — the most of any metropolitan area on the continent. Another condo? Yawn. Another boutique hotel? Take a number.
“We want to be able to have the hip factor of a boutique hotel, but with the attention to detail of a Four Seasons,” says Khabouth.
There is sawdust in the air, and earlier in the week his sales office was covered in plastic sheets, but Khabouth’s vision is taking shape.
“It all starts with the doors,” says Khabouth, pointing to oversized, ornate dark wood doors with elaborate gold handles. “That’s the first thing people see. Impressions count.”
Khabouth’s style is Prince of Persia meets Philippe Starck. In his restaurants, velvet and gold accents and dangling beaded curtains clash with angular granite and glass, recreating the Persian lounge for the 21st century.
Not surprisingly, the new project will be opulent, with a distinctly nightclub vibe.
Bisha’s hotel will have two themed floors: a black and red themed Rock and Roll floor, and a Hollywood Floor with a Beverley Hills vibe. Like his clubs, there will be a huge amount of space — 30,000 square feet devoted to amenities including food and beverage and a fitness centre.
On top of the 41-storey development, Khabouth’s INK Entertainment, along with Lifetime Developments principals Mel Pearl and Sam Herzog, plan to build 332 condos.
“We want to create a hotel brand from scratch,” says Pearl. “This hasn’t been done in Toronto since Issy Sharp built the Four Seasons.”
The partners hope that the Bisha concept can be expanded to other cities to take a place among other hip hotel brands, such as W and Thompson Hotels.
The concept might sound silly. Who would care about a Johnny-come-lately Canadian brand when the world is filled with boutique wannabees?
That was the question Pearl asked himself when he set to build a hotel in Toronto. Lifetime started out as a low-rise developer before branching into downtown condos. The company currently has eight projects on the market, with a C.V. that includes partnerships in Liberty Market Lofts and the Four Seasons Hotel and Residences, the highest-profile condo project in the city.
But developing a new brand is a lot riskier than simply hiring a management company such as a Ritz Carlton or Trump. The partners know that getting a customer to commit to an overpriced Red Bull or two is one thing. Selling condos that will go from more than $300,000 to over $1.5 million will prove more difficult.
Pearl hooked up with Khabouth through Bisha designer Alessandro Munge, who had worked for both men. Pearl, a youthful looking 55-year-old with a penchant for jeans, already knew Khabouth by reputation.
Khabouth, 49, grew up in Lebanon. Even though he has couture tastes — he owned his own Hugo Boss boutique, drove a Ferrari and his wife is a former model — Khabouth wears a signature dark urban safari jacket and could easily be mistaken for a bike courier.
He worked three jobs in high school; his first was at a McDonald’s. When he was 22, he started his first nightclub with a $30,000 loan. He hit it big when he used the proceeds from his first venture to rent a decrepit space at Richmond and Duncan in 1986, creating what would become the city’s entertainment district.
The privately owned INK generates now more than $30 million in revenues annually, according to Khabouth. It owns and operates the massive Guvernment and Kool Haus nightclub complex on the city’s waterfront, the largest such venue in Canada with more than 50,000 square feet on the main floor, and the This Is London nightclub in the entertainment district. It also owns the Dragonfly Nightclub in Casino Niagara and a string of restaurants, including Ultra Supper Club on Queen Street and Spice Route, an Asian-influenced bistro bar on King Street West.
This year, Khabouth is finally being recognized by the mainstream business community. He is on the short list of nominees for an Ernst & Young Entrepreneur of the Year award.
Khabouth has been likened to Canada’s Ian Schrager, the former Studio 54 owner credited for creating the widely copied boutique hotel concept in Manhattan.
He was the Toronto original, here before the über-hip Drake and Gladstone hotels. Before Peter Freed developed the city’s west end and brought in a newly opened Thompson Hotel with its rooftop pool parties. But it took him a lot longer to get in the business.
Khabouth understands the irony. The man who originated the lifestyle club looks like he’s coming late to the all-night party he started.
And besides, Canada already has a boutique chain. Khabouth was beaten to the punch by Quebec City’s Christiane Germain. In the ’90s she stayed at Schrager’s first hotel, Morgans in New York, and was inspired to do something north of the border. (A Hotel Le Germain in Toronto opened in 2002; a second is planned to open this fall beside the Air Canada Centre.)
“Being late is one thing, but it doesn’t matter how late you are if you’re incompetent,” argues Pearl. “I think people who buy into Bisha will see that they are getting value, they will see it in the execution.”
The developers understand that just because you build it, patrons won’t necessarily appear. You need buzz.
This is, perhaps, the entrepreneur’s competitive advantage in the hotel game.
Under INK, Khabouth books dozens of musical acts every year and plays host to celebrities and rock stars in his many clubs. Last year, he estimates he rented more than 1,500 rooms at Toronto hotels to host his out-of-town acts. This year INK was the official host for the Much Music Video Awards, organizing official after parties for stars such as Justin Bieber and Miley Cyrus.
In the brave new world of product placement, nowhere is the power of celebrity more profound than in the hospitality industry. You are where you dine and sleep.
Today, paparazzi in front of Nobu in New York or Thompson’s Hollywood Roosevelt provide perfect global marketing. Whether it’s handbags or hotel rooms, celebrities move product.
“I know this city,” says Khabouth. “I know the hotels. I know the nightclubs. I know the people. I’m not saying this because I’m trying to boast. It’s a fact.”
Pierre Bergevin, president of real estate consultancy Cushman & Wakefield, says there is still room for good boutique hotels in the city.
“Just try and get a room during the film festival,” says Bergevin. “They attract a higher-spending customer with good disposable income that isn’t necessarily on a corporate budget.”
Bergevin says the small size of the hotels also means that there is less chance of saturation.
But like hip nightclubs, hot hotels can be yesterday’s news. Maintaining an edge will be challenging. And then there is the question of too much product.
“What keeps me awake at night? That the (condo) market will crash,” Khabouth says bluntly.
Sales in the new condo market were down 8 per cent in the second quarter of 2010 compared with the first. Some analysts say there are already too many projects on the market.
Pearl remembers 1989 in Toronto all too well. His company had 40 low-rise homes in North York that had been sold. Only four closed the year the bubble burst.
“We learned some hard lessons,” says Pearl. “You never say never — the economy can always go south. Or your ego can get the better of you.”
Pearl says he has seen too many projects fail because of hubris. Of developers who think it’s cool to get into the hotel and restaurant business because they want to hang out with models.
“This isn’t about vanity, about having a place to crash,” says Pearl. “We’ve seen that movie before. Our numbers have to work.”
Pearl says Lifetime is conservatively managed and takes on strategic partnerships to diversify. Khabouth claims he is not leveraged on any of his existing companies. The partners say they are funding the start-up costs, including the elaborate showroom, entirely with cash.
Once construction starts, the building will be debt financed. But first, they have to sell consumers on the idea of buying into the Bisha lifestyle.
Advertising for Bisha shows a sensuous black and white image of a woman’s face, blindfolded by a lace handkerchief. It suggests the good life with a hint of S&M, not all that different from the underground club scene Khabouth helped cultivate.
But after conquering the club world, it remains to be seen whether he can create a hotel brand that will bear his name.
“This is taking everything I know — all my different skills — and putting it in one project,” says Khabouth. “It’s something that hopefully will be around for my kids and grandkids.”
