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Homebuyers avoiding chores fuel condo-hotel rebirth
LOS ANGELES, July 2:
Rainer Viete, who visits Florida from Venezuela about once a month, said he’s buying an apartment at the Hyde Resort & Residences hotel-condo project near Miami so he can order a meal or rent out his apartment when he wants.
“I love the amenities the building will have — a restaurant that can provide room service, a concierge, maintenance, a person that can clean your place, valet parking,” said Viete, 25, who works for his family’s real estate company in Caracas. The US$250 million project, scheduled to break ground in August, is already 85% sold.
Developers across the US are reviving a concept that collapsed with the real estate crash in 2008: combining condos and hotels.
In cities including Miami, New York and Los Angeles, a rebounding hospitality market is joining with rising demand for luxury homes, spurring developers to construct new full- services hotels and ask premium prices for residential units associated with a high-end brand.
“One plus one makes three,” said hotelier Ian Schrager, who is developing Miami Beach’s Edition, a luxury lodging-and- residential tower with Marriott International Inc, and a similar project on Manhattan’s Lower East Side with Witkoff Group.
“When you add condos to a hotel, the sum of the parts is more than the value of each individual component alone. They complement each other.”
Also in Miami, Richard LeFrak, the billionaire chief executive officer of New York-based LeFrak Organization Inc., is developing 1Hotel & Homes South Beach with investor Barry Sternlicht. Demand has been so strong that LeFrak is considering another hotel with condos in Los Angeles, he said in an interview.
In nearby Beverly Hills, developer Beny Alagem is planning two Waldorf Astoria condominium towers, to be built after a luxury hotel is constructed adjacent to the Beverly Hilton.
In Santa Monica, the city is evaluating a redevelopment plan under which a 16-story residential tower would be added to the existing Fairmont Miramar Hotel.
“You are seeing more and more condos that are associated with a hotel brand,” said LeFrak. Residents need only “make one phone call. ‘Change the linens, put food in my fridge, get my car ready.’ They don’t have to bother with organizing a lot of things. It’s a big draw.”
Steve Nagelberg, a 60-year-old orthopedic surgeon, said such amenities and a high-end brand name attracted him to the Ritz-Carlton Residences in downtown Los Angeles. He and his wife bought a 4,100-square-foot (380-square-meter) three-bedroom unit with panoramic views in early 2012.
The project was conceived before the current development wave as part of Anschutz Entertainment Group’s 4 million-square-foot L.A. Live entertainment complex.
Parking Cash
“No matter how wealthy you are, you are always considering where to park your cash,” Nagelberg said in a telephone interview. “But when I saw the Ritz-Carlton name, I thought, you can depend on this. I knew this type of company would be here not just a year from now, but 20 years from now.”
For developers, adding condos to a hotel project can attract financing that may not otherwise be available, said Bruce Ford, senior vice president and director of business development at Lodging Econometrics Inc, a Portsmouth, New Hampshire-based consulting firm.
“Whenever you do mixed use, different developers are awarded different phases with different time horizons,” Ford said in a telephone interview.
“That provides for different types of income with different returns. That can help attract different types of investors, while it also diversifies your revenue stream.”
Lodging Comeback
The US hotel industry has recovered since the financial and property-market meltdown.
Room rates in the first five months of this year reached a record, according to Jan Freitag, senior vice president at research firm STR Inc.
Through May, the average price for a hotel stay nationwide jumped to US$113.58 a night, up 4.1% from a year earlier, according to the Hendersonville, Tennessee-based company.
Even with rising demand, few new hotels — particularly full-service ones with restaurants, bars and other amenities — have been built because construction financing has been difficult to obtain, Ford said.
In the two highest lodging segments, 45 hotels were under construction as of December, compared with 130 at the end of 2007, according to STR.
“It’s still hard to finance a pure hotel play,” Ford said. In big cities, “it’s just very expensive to build.
So until the hotel is completed and returns money, you can sell condos and finance the hospitality component. The hotel component in turn will provide you with long-term cash flow.”
