DIEGAN CONDO HOTEL IN SAN DIEGO WILL HAVE AIR OF
AFFLUENCE

Penthouse suites in the condo hotel will average $1.6 million; other units $550,000

(Reprinted from The San Diego Metropolitan, May 2005)
By Manny Cruz

An Orange County developer is bringing a new concept to Downtown San Diego - a condo hotel. At the Diegan, a 21-story tower to front on Fifth Avenue, 161 condominiums and 24 penthouses will be offered for sale.

Buyers will have the option of living in the suites year-round, putting them up for rent and sharing in the rental receipts or using them as getaway destinations during the year.

Developers are marketing condo hotels as a hassle-free way to own real estate, but the concept isn't new. Condo hotels first appeared in the early 1980s in Florida, when 1950s-built hotels were converted into condominium units selling for less than $100,000 apiece.

Joel Greene, president of Condo Hotel Center, a Miami company that specializes in the sale of these hotels, says the trend didn't last the first time around. However, a resurgence began about six or seven years ago, and condo hotels are now under development throughout South Florida and in San Francisco, Boston, Washington, D.C., and Las Vegas.

The Diegan, a project of 5th Avenue Partners LLC, is being developed in conjunction with the House of Blues at 1055 Fifth Ave., between Broadway and C Street. The two will share some structural components. House of Blues is being readied for a May 20-21 grand opening.

Structural work on the free-standing hotel tower is expected to start within a month. A 2006 fourth quarter opening is expected. Construction cost for the two buildings is $110 million.

Lee Mullinax, principal of Vertical Properties Inc., which is handling sales and marketing for the hotel, says the sales value of the hotel units is $135 million. That will include some of his own money; he's going to buy a unit.

Studios in the Diegan will range from 320 square feet to 500 square feet while one-bedroom units will run from 720 square feet to 900 square feet. Penthouses will range from 1,000 square feet to 2,800 square feet. "The average price for a condo will be around $550,000," says Mullinax. "The average price for a penthouse will be $1.6 million."

Each of the units will be delivered to buyers fully furnished, including full marble baths and plasma television displays. "Everything down to the linens and flowers in vases," says Mullinax.

To help infuse the soul of the Delta Blues, a batch of the Big Muddy - real Mississippi River mud - was poured on what will be the stage of the House of Blues, being built on Fifth Avenue north of Broadway Downtown, by Jim Biafore (left), g.m. of the new HOB San Diego venue, and Dolf Berle, COO of HOB Entertainment Inc. The club opens May 20.

Mullinax figures most buyers will use their suites as a second home investment and getaway destination rather than a primary residence.

"The owner can reside in it if they choose, or put it in the hotel management program where they will get 60 percent of the revenue generated by their unit," he says. "And they can use it 28 days out of the year in any configuration of time they choose, plus they get a Foundation Room club membership in the House of Blues for the first year, about a $2,500 item."

Mullinax says the Diegan will be built to five-star standards and will include a health spa, fitness center and pool, two restaurants and Whiskey Bar lounge.

Buyers who put their units into the hotel program don't have to worry about upkeep and maintenance - hotel management takes care of that. And they can reserve the space for themselves anytime they want. "It makes little sense for an investor to own a condo as an investment, but this concept works," says Mullinax. "The owner can have a nice cash flow and get the use out of the unit as well."

The Diegan was designed by Tanner-Hecht Architects, a San Francisco company. Rockwell Group will provide interiors.

Mullinax says several hundred individuals are on an interest list, the majority of them from San Diego. Others are from Los Angeles, Orange County and Arizona.