Condo Hotels Move Beyond Resort Towns
By DENNIS RODKIN
This article reprinted from The New York Times, April 2, 2004.
CONDO hotels – developments that, as the name suggests, provide condominium ownership in a hotel-like setting – have for years been popular in vacation spots like Aspen, Miami and some upscale resort towns in Mexico. But recently, developers have begun to spread the concept to other parts of the country: Orlando, Las Vegas, Myrtle Beach, Chicago.
Yes, that’s right, Chicago, that wind-swept metropolis, hardly the first place that comes to mind when you think of an idyllic weekend retreat.
Jim Walesa, for one, is skeptical. Mr. Walesa, owner of a financial advisory firm in Park Ridge, Ill., who lives in the Lincoln Park area of Chicago, recently bought a condo-hotel unit in the Miami outpost of the Canyon Ranch spa, scheduled to open in late 2005. But he said that he could not imagine condo-hotels working in his hometown. “I grew up here, and I love living here, but who on God’s green earth wants a vacation place in Chicago?” he asked. “Nobody wakes up and says, `Hey, it’s 22 degrees in Chicago, and it’s going to snow for the next four days. Let’s go there!’ ”
But Frank Gironda was only too happy to fork over $700,000 for a 1,064-square-foot one-bedroom unit in the Elysian, a new 56-story hotel planned for a site in Chicago’s Gold Coast.
Mr. Gironda, owner of three beauty salons and day spas in Chicago’s western suburbs, grew up in a walkable neighborhood in Chicago, and even though he is happy with his suburban home, complete with pond, in Naperville, about 35 miles west of downtown Chicago, he still thinks longingly of urban life. “It’s nice to wake up in the city when the weather is nice and walk over to the lake and read the newspaper at a coffee shop,” he said.
Mr. Gironda says that he is too plugged into his Naperville golf club and that his wife, Sherri, is too content with their present home to trade it in for a permanent place in the city. But when he heard about the Elysian, scheduled to open in 2006, he saw it as an ideal alternative.
Mr. Gironda said that he believed the money he paid for his place in the Elysian would pay off two ways: it gives him an equity toehold in Chicago’s healthy downtown residential market, and it lands him and his wife a pied-à-terre that they won’t have to maintain on their own. “This way I don’t have to worry about getting a cleaning lady or having somebody go in and flush the toilets every couple of weeks,” he said.
The Elysian is one of a pair of planned high rises that will introduce the concept of the condo-hotel to Chicago. The second building is the Trump Organization’s Trump International Hotel and Towers, scheduled to open in a new 90-story tower on the north bank of the Chicago River in 2007.
Condo-hotels are descendants of the time-share system, in which buyers own a unit outright and can put it in a rental pool when they aren’t there. “You get the people who come to Florida regularly and don’t want to stay in a hotel room every time or buy a condo they have to take care of,” said Joel Greene, president of Condo-Hotel Center, a division of his father’s North Miami real estate firm, Sheldon Greene & Associates. Along with an equity stake and mortgage interest deductions, owners get more space than they would probably get in a regular hotel – typically a one- or two-bedroom suite, said Mr. Greene – and can defray some of their costs by renting it out when they are not there.
In Miami, condo-hotels are mostly concentrated in South Beach, Miami Beach, downtown Miami and Sunny Isles. Some of the better known entries are the Fontainebleau II in Miami Beach, 225 of whose 230 condo-hotel units have been sold; the Ritz-Carlton in Key Biscayne, which sold out its 188 units in 2001; and Canyon Ranch in Miami Beach, which sold 136 of its 151 units in about four months, according to Mr. Greene.
The Setai in Miami starts at $700,000 for one-bedrooms and tops out at $4.5 million for a four-bedroom unit. Nearby, in Miami Beach, the Bentley Beach has studios from $299,000 and one-bedrooms for up to $878,000. In Las Vegas, a studio condo-hotel unit planned at the new Residences at MGM Grand goes for $460,000 to $595,000, and a two-bedroom for $1.1 million to $1.495 million. Prices are typically 20 to 30 percent higher than for comparable residences in a traditional condominium complex, Mr. Greene said.
A lesser premium seems to apply in Chicago. At Trump’s Chicago project, for example, condo-hotel units are selling at an average of $800 a square foot, according to Charles Reiss, a senior vice president with Trump. That’s compared with $725 a square foot for standard condos in the same building; the differential is for the hotel amenities (room service, spa) that hotel-condo units come with, as well as the fact that they’re furnished and that they can be rented out to defray costs.
Both types of units are still priced well above the prevailing rate in Chicago’s major North Side condo neighborhoods. According to Appraisal Research Counselors, three-bedroom condos in those areas average about $362 a square foot, though there are several new buildings with prices closer to, but rarely as high as, Mr. Trump’s.
So far, transplanting the hotel-condo from resort locales to Chicago seems to be working. The Elysian has sold 60 of its 80 condo-hotel suites since sales started last summer, and in February the Trump Organization announced that sales had been so strong that it would switch 10 floors that were to have been office space to residential, with 25 new condo-hotel units and 174 more of the standard condos.
“We’ve tweaked the idea; we made it a more urban model,” said David Pisor, chief executive of the Elysian Development Group, explaining that its units are being marketed more to area residents who want a pied-à-terre than to those who see Chicago as a vacation destination.
Mr. Pisor predicts that the owners of his condo-hotel units will use them more spontaneously than their counterparts in Miami do. Because they won’t have to book a flight and set aside a few days, they might wait until after dinner on Friday to decide to stay that night. If the unit is already rented to a hotel guest, the owners will get another room and an armoire containing their personal belongings will be rolled in.
On nights when the hotel is completely booked, the owner is out of luck. But the managers of most of these properties anticipate which nights are most likely to fill up – a Valentine’s Day that falls on a Friday, say – and alert unit owners in advance.