In Miami, Condos and Hotels Now Wed in Higher Style

 

By Ernest Beck

The New York Times

Published: September 24, 2006

DR. STEPHEN MEISEL, a radiologist in Los Angeles, had not heard of a condo-hotel until a year and a half ago when he checked into the Ritz-Carlton in Key Biscayne, Fla. Because of a reservation mix-up, he and his family were given a condo-hotel unit, a privately owned apartment rented by the hotel, instead of a hotel guest room. “I said, ‘What is that?’ I had no idea,” Dr. Meisel recalled.

But Dr. Meisel was so impressed with the condo, which had a kitchenette, a washer-dryer unit and an ocean view, that he quickly bought a two-bedroom unit in the building for $1.8 million. Then he bought an adjoining studio for $500,000 and a one-bedroom for $650,000. Eight months later he picked up two preconstruction units, a studio for about $900,000 and a one-bedroom for about $1.2 million, at the W condo-hotel on South Beach.

While sales of homes and condominiums in much of Miami’s real estate market are sagging, many buyers are gambling on a new style of condo-hotel property that is backed by design-conscious hotels and located on expansive lots on Miami Beach. Although condo-hotels have been around for decades, it is only recently that trendsetting hotels have entered the field: besides the W, other boutique brands heading south include the Gansevoort, Canyon Ranch, the members-only SoHo House and the Regent.

Miami is attractive for condo-hotels, said Michael Achenbaum, president of the Gansevoort Hotel Group, because it draws young, affluent tourists — the kind who would stay at the Hotel Gansevoort in New York’s meatpacking district. “I wouldn’t buy a condo-hotel in Tulsa,” Mr. Achenbaum said. “Nothing against Tulsa, but it doesn’t get the same occupancy and premium room rates.”

A condo-hotel in Miami can cost as much as a regular condominium. But because the unit can be rented when the owner is absent, with the revenue split 50-50 with the hotel, after service fees are paid, buyers hope to earn income from hotel guests. That was why Patrick Simeon, a real estate dealer from Queens, N.Y., bought a one-bedroom five months ago at the Gansevoort, paying $900,000. “The area and the hotel are known for luxury and restaurants and parties,” Mr. Simeon said. “With a place like that, you will always make money.”

Most of the new condo-hotels are north of Miami Beach’s quaint Art Deco district, known for its low-rise buildings, dense traffic and vibrant street life. The newcomers are on a section of beachfront above Collins Avenue and 21st Street that was home to high-rise hotels and condo towers dating from the 1950’s to the 1970’s. The large lots appealed to developers who needed room for spas, sports facilities and more towers.

The amenities planned for the new condo-hotels are flamboyant, even by Miami standards. At the Gansevoort South, a makeover of the old Roney Plaza Hotel, rooms will be swathed in gray suede, and the pool area décor will include flaming fire pits at night. The $435 million W, a new 19-story building, will feature black ceramic floors in the rooms and a Bliss Spa.

Meanwhile, Canyon Ranch Living, a renovation of and addition to the 1950’s-era Carillon Hotel on Miami Beach, features a three-story sculpture in the lobby made of mangrove branches, designed by the architect David Rockwell, and an igloo in a 70,000-square-foot “leisure and lifestyle space.” The Regent features a glass-bottom pool.

Yet it is unclear whether these condo-hotels will make money from rentals or eventual resale. There are no reliable data on a secondary market for condo-hotels, and rental rates and occupancy levels fluctuate with industry cycles. Even thriving tourist towns like Miami have off seasons, and Florida's  fierce tropical storms can dampen visitor numbers.

“If you only consider rental income and expenses, it’s hard to justify buying these properties at these prices,” said Joel Greene, president of Condo Hotel Center, a real estate agency in Miami. Mr. Greene advised that, instead of expecting cash flow, would-be buyers should regard condo-hotels as a type of “hassle-free real estate ownership” and a second home that has a likelihood of appreciating in value.

Dr. Meisel, 62, said he was just about covering costs, with down payments of 20 percent to 30 percent, at his first condo-hotel units at the Ritz-Carlton. He expects to do at least as well at the W because of its flashier image and ocean frontage on Collins Avenue, where an aging Holiday Inn is being demolished to make way for the hotel.

Nely Galán, a 42-year-old television producer in Los Angeles who bought at Canyon Ranch, is counting on rental income, too. Two years ago, she paid around $500,000 for a unit designed for disabled use after seeing plans for the hotel’s “wellness community” on the beach. A year later she bought a larger, regular condo unit, with a lanai, for $1.9 million, in the mixed-use complex.

 

Sheraton World Orlando Resort to Become Condo Hotel

September 29, 2006 - Buena Vista Hospitality Group, a Tampa resort-development group has purchased the Sheraton World Orlando Resort on International Drive in Orlando, Florida.  The group plans to immediately embark on a $30 million renovation of its 1,100 hotel rooms as well as its common areas and meeting spaces.

The hotel will be converted into a four-star condominium hotel.  It will be renamed the International Plaza Resort & Spa, and it will drop its franchise affiliation with Sheraton. 

Located on 28 acres adjacent to SeaWorld Orlando, the hotel was built in the early 1980s. It has about 70,000 square feet of convention space.

The new owners plan to keep the hotel open throughout the renovation process, expected to take 18 months.  It will be completely refurbished and updated.  It will also have a tropical theme. 

Buena Vista Hospitality Group owns several other Central Florida properties, including the Doubletree Club Lake Buena Vista on State Road 535 near Disney World.

Condo/hotel development for Golden, British Columbia

By Lorene Keitch
Star Reporter
The Golden Star
Sept. 20, 2006

Plans are underway by a Vancouver-based developer to build a condominium hotel on the north side of Golden, British Columbia.

Lyndon Decore hopes to start advertising his condo hotel units within the next few months, following changes to the land zoning that need to be passed by town council.

“My vision is a 26-unit townhouse complex with an outdoor pool, hot tub and office
facility,” Decore says. “The plan is to do the condo sales to people who are looking for vacation properties.”

Cleo Corbett, town planner, explains that his condominium hotel will essentially be more like a townhouse complex than a hotel.

“It’s like a multi-family development that is stratified and then can be used for short-term rental,” she says.

Decore says now is a good time to develop in Golden. He has owned the property at 612 7 St. N for about four years and has watched Golden grow in its tourism offerings.

“Golden has a lot to offer,” he says. “I chose Golden because I thought there was some great potential. There’s the ski hill and there’s a big summer tourist market.”

Decore sees his project as a way to attract people to the main core of the town.

“I’ve always liked Golden; I think it’s a beautiful place,” Decore says. “But, it would be nice to have more of the tourists come into town and spend more time downtown.”

Decore chose 26 units for his complex because it provides enough space for covered parking for each unit.

Town Hall has asked Decore to add one more suite for a manager. Corbett says
council agreed to a manager’s suite for safety and security reasons.

The zoning change for the land, to be designated C-4 (service commercial zone) passed third reading at the Sept. 5 council meeting and as of press time was awaiting final adoption.

Decore, whose background is in the hotel industry, says if all goes as planned, he hopes to have brochures for the complex out by the new year.

Condo-hotels create risks, opportunities for buyers

By Noelle Knox
USA TODAY

If only Eloise could see the new rooms at The Plaza Hotel, where the famous 6-year-old children's book character lived on the top floor. The bathrooms have marble vanities and chandeliers. There's a mini wireless computer that can change the temperature, order theater tickets or make dinner reservations. And there's a butler on every floor.

"Charge it, please," she'd say.

When The Plaza reopens in spring — after a $350 million renovation — you, too, will be able to live at the landmark building on Central Park South.

Well, sort of. The Plaza will be a condo-hotel, whose 152 rooms will be sold for $1.6 million to $9 million apiece. In exchange for an address to die for, the owners will be able to stay in their condos for up to 120 days a year.

The other nights? The owners' belongings will be locked in a closet, and the room will be rented out to hotel guests at top rates. The owners also chip in to pay the hotel's maintenance and marketing bills, though they do receive a portion of the revenue when guests stay there.

The Plaza's conversion to a condo-hotel spotlights a real estate phenomenon that is creating new opportunities and risks for people in search of vacation homes. There are nearly 250 condo-hotel projects underway nationwide, representing almost 10% of all hotel rooms in the works, according to Smith Travel Research. Most of the condo-hotels are being built or converted in destination cities, such as Las Vegas, Miami, San Diego and Chicago.

Trump has projects underway

"This is a major part of what we are doing in the future," says Donald Trump Jr., executive vice president of development and acquisitions for the Trump Organization, which has seven projects underway, including one in the Soho area of Manhattan, one in Chicago and three in Florida. "We have north of 3,000 rooms coming online in the next two years."

Though the concept has been around since the '70s, condo-hotel construction exploded in the past three years. As construction costs soared during the real estate boom, and as many hotels were converted into condos, the idea of the hybrid condo-hotel took off. For hotel developers, it's often the easiest way to finance a project.

Last month, the historic Hotel del Coronado in San Diego announced it was building 35 condo-hotel rooms to help pay for expanding the 118-year-old Victorian-style hotel. Buyers can use their units for up to 90 days a year — but for only 25 days within a 50-day period.

At a cost of $2.7 million to $3.9 million each, that would pencil out to a per-night room cost of at least $6,000, excluding real estate taxes and maintenance fees, if the buyer kept the unit for five years. How much of that cost would be offset by renting out the room to hotel guests on the other nights depends on vacancy and room rates.

Resale value

Buyers of condo-hotel units can sell them like any other property. That's both an advantage and a risk. The resale value is based as much on tourism and business travel in the area as on the housing market.

Investor speculation in condo-hotel construction has been rampant. On the Las Vegas Strip, the first tower of the MGM Signature condo-hotel was finished over the summer, and already about 25% of the 576 units are up for sale.

"Just a small handful are selling below market, in some cases up to $100,000 below market," says Bruce Hiatt of Luxury Realty Group in Las Vegas. "We're getting investor calls trying to buy some of those, trying to buy at the bottom."

Tony Kim has bought nine condo-hotel units, including one in the second tower of the MGM Signature, to be completed around Thanksgiving. It's crucial, he says, to buy in the preconstruction phase, when prices are at a low. And location, he says, is critical.

Kim, president of Mid-K Beauty Supply in Omaha, stays a week or two a year at his units in Las Vegas and Toronto and is waiting for his units in Chicago to be built. When construction is done on all of his units, "I will be flipping some of them to be debt-free," says Kim, 44. "Probably three or four."

Advantages and disadvantages

There are clear advantages for buyers. The condo-hotels offer room service, maids and other luxuries of hotel living. Someone cares for the property when you're away. And the rental income, which is shared roughly 50-50 with the hotel operator (depending on the contract), can help cover your mortgage, taxes and association fees.

The disadvantages, though, are also plain: You have to reserve your own room far in advance (60 to 90 days at The Plaza, depending on the season). The restrictions on the amount of time you can use your room vary from city, state and country. The hotel management furnishes all rooms the same.

As with most hotel rooms, you get not a kitchen but a kitchenette with a mini-fridge and a microwave. And if the hotel has a high vacancy rate, you'll still have to help pay the salaries of a lot of idle porters and maids.

The contracts and risks are eye-crossingly complex. The Securities and Exchange Commission bars developers from marketing condo-hotels to buyers as investments.

As a result, the developer can't give out projected occupancy or room rates to potential buyers. It can be difficult for buyers to estimate rental income from the property.

Understanding the details in the contract — specifically, who pays for what — is critical, as Michael Dorio learned after he bought a condo-hotel unit in Montreal.

Canadian regulators ruled that the property was a business investment instead of a residential investment, which raised the property and water taxes. The operator also asked residents to pay its business taxes, which Dorio said wasn't mentioned in the prospectus.

"We had additional expenses we were never anticipating and were never in the prospectus or any documentation," says Dorio, 65, of Westchester County, N.Y. "Several of us have filed small-claims actions" against the operator.
That said, his condo-hotel unit generates "good revenue that covers most of our expenses."

At The Plaza, entry-level buyers are paying $1.6 million for a unit, plus about $51,600 a year in maintenance fees and taxes. Since the condo-hotels went on sale over the summer, 22 have been sold.

So far, most of the buyers have been corporations that want rooms for clients, investment bankers who work late in the city and Japanese businessmen.
"And, hopefully, Eloise will come back, as well," says Miki Naftali, CEO of El Ad Properties, The Plaza's new owner.

Condo Hotel Center Launches Ginn sur Mer Bahamas Website

Sept. 2006...Condo Hotel Center, the Miami-based worldwide leader in condo hotel sales, has launched a website to promote the to-be-built Ginn sur Mer development in the Bahamas.

The resort will encompass 2,000 acres on Grand Bahama Island. It will include over 6,300 vacation homes of which 4,400 will be condo hotel units.

"With all those condo hotels being built, it was a natural for Condo Hotel Center to want to become involved," explained Joel Greene, president of Condo Hotel Center. "Ginn sur Mer will be an exceptional community. It will take almost 10 years to build. We wanted the opportunity to be able to market the condo hotel units to our clients over the years."

Ginn sur Mer will include an Arnold Palmer-designed golf course, a Jack Nicklaus-designed golf course, a 55,000 sq. ft. casino, a full-service spa, two yacht marinas, a private airport, beach clubs, retail centers, restaurants, kids' clubs, tennis courts, equestrian facilities, two water parks and much more.

"Ginn sur Mer will change the Caribbean. It will become the resort by which all others are judged. Condo Hotel Center wanted to be a part of that massive undertaking, particularly with regard to the condo hotel units."

The new website can be found at www.GinnSurMerBahamas.com.

Hotbed for Condo-Hotels

South Florida Sun-Sentinel

By Paul Owers

September 11, 2006

A lot of people can make money with condo-hotels because the fundamentals are strong. Florida leads the nation in the number of condominium-hotel rooms in the pipeline, but analysts fear an oversupply could prove troubling for developers and consumers.

The Sunshine State has more than 31,500 condo-hotel rooms under development, according to Smith Travel Research of Hendersonville, Tenn. Nevada is second with more than 30,000 rooms planned, while California is a distant third.

South Florida is a hotbed for condo-hotels, which investors consider a good alternative to second homes. Broward County has about two-dozen projects in various stages of planning and construction, including the Trump Las Olas Beach Resort in Fort Lauderdale.

Condo-hotels also are planned for Palm Beach County, including conversions at the Brazilian Court Hotel in Palm Beach and the GulfStream Hotel in Lake Worth. Investors buy the individual hotel rooms from developers, who use the money to help finance the projects. Prices for condo-hotel rooms typically range from $200,000 to $3 million.

When the owners aren't there, they can rent their rooms, charging fees of $275 a night or more at upscale properties. Many turn over the units to a hotel management firm, which takes a cut of the rental revenue.

Experts say developers are building too many rooms, just as they flooded the market with residential condos during the housing boom of 2000 to 2005. 'I'm definitely concerned about overbuilding since some of these projects were fueled by the real-estate hype,' said Richard Hollowell, a Fort Lauderdale consultant to condo-hotel developers. 'There are only so many bodies that are coming to certain areas to fill up rooms.'

As of July, there were nearly 106,000 condo-hotel rooms planned nationwide, making up about 18 percent of all the hotel rooms under development, according to Smith Travel Research. Jan Freitag, a vice president of Smith Travel, says many of those condo-hotel rooms won't get built once developers realize the market is saturated.

Freitag compares the condo-hotel boom to the extended-stay hotel craze of the 1980s and the boutique hotel market of the 1990s.

Both segments proved popular for a time but didn't change the travel industry. He expects condo-hotels to have a similar effect.

'A lot of people can make money with condo-hotels because the fundamentals are strong,' Freitag said. 'The question is, what happens in a downturn?'

There's no guarantee that owners will have a steady stream of rental income, and many find that they don't have enough money to cover their mortgages, insurance and other expenses.

In addition, condo-hotel owners face restrictions, such as limits on how often they can use their rooms. And owners who try to resell units within five years have trouble recouping their money.

'Just like any investment, it doesn't work out for everybody,' said Bob Goldstein, president of Hospitality Consultants Management Services, a Boca Raton-based company that oversees troubled properties for banks. 'Condo-hotels are not really designed to improve the net worth of the people who are buying the individual units. The owners are there to provide financing to developers.'

Condo-hotels have been around for decades, but the concept became popular after the 2001 terrorist attacks, according to the National Association of Condo Hotel Owners. The Scottsdale, Ariz.-based trade group was formed this year to serve both developers and unit owners.

Before consumers commit to buying condo-hotel rooms, they should review rental program documents, know exactly what fees they'll be paying and have a good idea of how much rental income they can get.

Condo-hotel buyers should expect that rental programs will pay 50 percent to 75 percent of their annual costs, excluding mortgages.

'A lot of owners expect to have their unit paid for by the rental program,' said Shadi Zaki, development director for the condo-hotel association. 'That's almost impossible.'

New Openings for Condo Hotels, Hotels With Private Residences and Timeshares Set to Accelerate as the Pipeline Unfolds

Lodging Econometrics (LE), the Industry Authority for Hotel Real Estate, in a mid year report released its forecast through 2008 for three important sectors of the Lodging Development Pipeline; Condo Hotels, Hotels with Private Residences and for Timeshare and Vacation Club projects.

LE's president, Patrick Ford, said, 'New Project Openings for Condo Hotels are set to accelerate and forecasted that 27 projects will open in the second half of '06, with another 37 scheduled to come on line in '07 and 39 more in '08. For the period in aggregate, a total of 103 new projects having a planned 23,143 condo hotel units and 5,315 developer owned guest rooms will open. The average size of each project will be 276 quest rooms.'

Ford indicated that, '76 of the 103 projects are already Under Construction. In the next 12 months, an additional 32 projects are Scheduled to Start Construction while another 38 projects are being actively pursued by developers and are in various stages of Early Planning. 78% of the Condo Hotel projects are New Construction while 22% are Open and Operating Hotels that will convert all or a portion of their guest rooms to condo ownership.'

Las Vegas, Orlando, Miami and Fort Lauderdale account for 38% of the projects and 56% of all condo units in the pipeline. Oceanside, Casino and Theme Park markets along with a select few urban centers are the preferred locations.

New Openings for Hotels With Private Residences Will Also Accelerate

Ford also stated, 'For hotels planning Private Residences, there are a total of 150 projects in the pipeline; 51 are Under Construction, 57 are Scheduled to Start Construction in the Next 12 Months while 42 are in Early Planning.'

Ford explained, 'Most of these projects are in the upscale and luxury segments and are located in the urban centers of major cities. Collectively, Boston, Chicago, Miami, New York, Orlando and Seattle, account for 53% of all planned Hotel Residences.

While the project count in the pipeline is nearly the same as for Condo Hotels, the forecasted pace for New Openings will lag behind by about 6 months. 13 projects will open in the second half of '06, 34 in '07 and 49 in '08. In total through '08, LE forecasts that 96 projects will open having a total of 18,228 Private Residences along with 17,452 developer owned guest rooms.'

Timeshares Get High Marks

Condo hotels are different than timeshares. After all, you're purchasing whole ownership of a vacation home, not just a week or two of annual use.

However, timeshares are often compared to condo hotels. For that reason, you might find it interesting to learn that a study just released by the American Resort Development Association International Foundation (AIF) says that timeshare owners are committed travelers who report high satisfaction rates and interest in purchasing again.

Conducted by Ragatz Associates, Resort Timeshare Consumers: Who They Are, Why They Buy examines the demographics, buying patterns, and usage of vacation ownership based on surveys of 938 recent timeshare buyers and 1,547 owners who purchased prior to 2005.

By all leisure indicators, timeshare has improved the vacation experience for owners. The vast majority of all owners (80.3 percent) express satisfaction with their timeshare purchase; 75.7 percent say owning a timeshare has increased their looking forward to vacations, and 68.4 percent say owning a timeshare has increased the amount of time on vacations.

A full 66.4 percent of all owners say timeshare has increased their learning experiences, and 52.8 percent claim owning timeshare has increased their health and happiness.

Approximately 25 percent of recent buyers expressed interest in purchasing additional timeshares--a sizeable amount considering the average American is only allotted two weeks of vacation leave each year.

"Consistently high satisfaction rates along with repeat sales to existing owners and owner referrals of potential buyers point to the premium value vacation owners find in timeshare," said Howard C. Nusbaum, ARDA's president and CEO.

"The study findings also show that timeshare owners are committed travelers and savvy purchasers. By attracting a steady stream of repeat visitors who stay longer and spend more than the average traveler, timeshare resorts accrue a host of economic benefits to the surrounding region." The same could be said of condo hotels as owners tend to return several times a year to use their vacation home.

According to the study, the average timeshare visitor spends 8.6 nights per vacation in the resort area where their timeshare is located. The average timeshare visitor party spends $1,334 per timeshare vacation--an increase of 10.7 percent since 2002. The average size of timeshare visitor parties is 3.8 persons.

Of all owners, 35.8 percent personally used their own timeshare purchase during the past 12 months, while 47.4 percent exchanged or space banked it, 4.4 percent rented it out, and 2.9 percent gave it away. Only 9.5 percent of time owned by all owners went unused during the last 12 months.

Much like condo hotel buyers, timeshare buyers are savvy travelers who shop around: The average recent buyer attended 2.6 sales presentations before making a purchase. Of recent buyers, 57.4 percent purchased directly from a developer; 24.9 percent purchased from a home owners' association; 10.5 percent acquired their timeshare as a gift, inheritance, or from some other source; and 7.2 percent purchased from a pervious owner.

For recent time share buyers, the most attractive resort area characteristics
include:

-- Attractions, entertainment 61.0 percent
-- Ocean beach 50.3
-- Mountains 36.2
-- Lake 24.2
-- History, culture 23.8
-- Golf 22.1
-- Tropics 20.1
-- Gaming, gambling 14.8
-- City, urban 13.2
-- Snow skiing 11.9
-- Desert 9.5

These are many of the same characteristics that attract buyers to condo hotels and help to explain why cities like Miami, Orlando, Las Vegas and Colorado are some of the most popular condo hotel destinations.

New Website - Trump Condo Hotels

Over the past three years, one of our consistent best selling condo hotel products has been Trump condo hotels. The Trump name is magic. Everyone wants to own a piece of the quality, elegance and success that have become associated with any and all things Trump. So we decided it was time to dedicate a whole website to Trump condo hotels. This will be the place to find out about new Trump condo hotels coming on the market and about Trump's plans for future properties as well. Be sure to check it out, www.TrumpCondoHotels.com.

Condo Hotel Blog

It was inevitable. We had to start a blog. Condo Hotel Center has always been about providing information so buyers can make educated decisions. These days, there's just so much information coming out about condo hotels, and we wanted some way to get the word out quickly and easily. A blog was a natural. We plan to publish news items, press releases, ideas and pictures related to condo hotels. And we'll welcome input from you, our readers. So keep an eye on this condo hotel informational resource as we give this blog a whirl.