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.