The condo-hotel combination is making a comeback in the U.S. market, with numerous projects underway across the country, Bloomberg reports. Developers are combining a rebounding hospitality market with rising demand for luxury homes and targeting such markets as Miami, New York, and Los Angeles.
More residents are being drawn to the extra perks that can come with condo-hotels, such as room service, concierge, valet parking, housekeeping, and more.
Winning in the Condo Craze
“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,” says Ian Schrager, the developer of Miami Beach’s Edition, which is a luxury condo-hotel linked with Marriott International Inc.
The idea of a condo-hotel is not new, but the concept mostly collapsed during the housing crisis, Bloomberg reports. Some large-scale projects had been casualties of the financial fallout, such as SB Hotel Associates’ Trump International Hotel & Tower in Fort Lauderdale, Fla., and the Shangri-La hotel-condo development that came to a halt in 2008 and did not resume until 2012.
But developers are willing to bank on such projects again, believing there is a strong market for such types of development.
“You are seeing more and more condos that are associated with a hotel brand,” says Richard LeFrak, CEO of LeFrak Organization Inc., which is developing 1Hotel & Homes South Beach in Miami and considering another hotel with condos in Los Angeles. Residents need to 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.”
The perk for developers is that it can attract financing that may not have otherwise been available. Different types of investors may want to get involved, fostering different types of returns on the project, says Bruce Ford, Lodging Econometrics Inc.’s senior vice president and director of business development.
Despite rising demand, few new hotels have been built in recent years, since financing has been difficult to obtain, Ford says.
“It’s still hard to finance a pure hotel play,” Ford told Bloomberg. 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.”
Source: “Homebuyers Avoiding Chores Fuel U.S. Condo-Hotel Revival,” Bloomberg (July 2, 2014)Jesse@DomainRealtyGroup.com