By Jim Butler, Hotel Lawyer, Author of www.HotelLawBlog.com
Condo Hotel Lawyer Las Vegas. On November 30, 2006, I will be participating
in the first two opening general sessions of IMN�s Symposium on Financing,
Developing and Operating Condo Hotels at the Mirage in Las Vegas, Nevada.
This will be an interesting opportunity to compare notes and take the current
pulse of the industry. Is the bloom off the rose? Can condo hotel deals
still be done? Where is the opportunity now? How do you capture it? What
are the pitfalls? How do you make a condo hotel deal work today?
Why are more than 550 people coming to a condo hotel symposium in late
2006??? Obviously there is a huge continuing interest in the condo hotel
phenomenon, but is the model sustainable in the current environment? Unless
there are unique features, great sponsorship and market validation? Where
are we? What is happening?
Where are we?
Our perspective. We have been the business and legal advisors to clients
on more than 80 hotel-enhanced mixed-use projects, all of which have at
least a significant condo hotel element. These deals are in every major
market in the U.S., as well as Latin America and Europe.
Here are some thoughts gleaned from our experience:
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The condo hotel market is slowing down. The speculators or �flippers� are
all but gone, and some think that they may have accounted for up to 80%
of the condo sales in some markets. The eight-hour blow out of Trump�s
Hawaii project or the one-day sell out Paul Allen�s Seattle project are
the exception to the rule.
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Many foreign markets may be at early stages of condo hotel development
� say in Mexico, Costa Rica, the Caribbean, Europe and Asia. However, in
general, we are in an advanced stage of the cycle in the U.S., and all
of my comments here relate to the U.S. market unless otherwise noted.
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Things are �normalizing� but definitely not dying. The level of activity
over the past few years has simply been unsustainable. Normalizing is good
for the long run and good for quality players.
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Great projects with great sponsorship in good markets will continue to
get done. Not all projects will get done. Not all projects should get done.
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In general, most resort markets will be stronger than most urban markets.
Many secondary and tertiary markets will languish, except in unique circumstances
driven by real consumer demand.
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The condo hotel business is driven by a confluence of factors, including
difficulty in financing hotel development, skyrocketing construction costs,
premium prices consumers have been willing to pay for convenience . . .
but overall, the driving force has been consumer demand for condos.
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This driving force is waning! It is not a melt down. It is a normal cyclical
event. It corresponds to the rest of the demand for residential real estate.
That is what condos are!!!
What does it all mean?
A residential condo slowdown in the US should not be shocking to anyone.
Have you read what is happening to homebuilders� business? Have you looked
at recent stock performance for homebuilders? Why would the market for
condos in a hotel be that much different?
Actually, it could be different, but experience is demonstrating that
condo hotel purchases are more closely related to the residential market
where things are slowing down, than to the hotel market where the transaction
pace is furious. In fact, more hotels were bought and sold in the first
6 months of 2006 than in all 12 months of the prior year, suggesting that
we could be on track to have twice as many hotel purchases this year as
last year.
The condo hotel boom is barely starting in China, India, Latin America
and Europe. It may have a long way to go there before reaching the �mature�
end of the cycle, as we think it has in the United States.
The bottom line.
My friend Taz Brown, VP with Sunburst Marketing and one of the top luxury
residential marketing guys in the country, recently said �The field is
getting slippery and you need long cleats to run the field, much less score.�
That statement pretty well sums it up for the condo hotel situation
right now. But there is a bright and enduring future for the hotel enhanced
mixed-use. And this is something that would have been all but impossible
without the condo hotel phenomenon. But to take advantage of the situation
you have to adopt a new way of thinking as condo hotels morph into a reliable
and predictable component of projects.
But more on that in the near future . . . and after I take my own temperature
at IMN�s Condo Hotel Conference in Las Vegas. Maybe I am one of the only
people on the planet who thinks the tide has turned and success will be
more elusive, calling for new approaches and strategies. (including going
back to the Condo
Hotel Fundamentals�5 Keys to Success!)
About the Author:
Jim Butler is recognized as one of the top hotel lawyers
in the world. He devotes 100% of his practice to hospitality, representing
hotel owners, developers and lenders. Jim leads JMBM�s Global Hospitality
Group®�a team of 50 seasoned professionals with more than $40 billion
of hotel transactional experience, involving more than 1,000 properties
located around the globe. In the last 5 years alone, they have brought
their practical advice to more than 80 �hotel-enhanced mixed-use� projects,
a term Jim coined to fill a void in industry lexicon. This term describes
one of the hottest developments in real estate-where hotels work together
with shopping center, residential, office, retail, spa and sports facility
components to mutually enhance the entire project�s excitement and success.
Jim and his team are more than �just� great hotel lawyers. They are
also hospitality consultants and business advisors. They are deal
makers. They can help find the right operator or capital provider.
They know who to call and how to reach them. They are a major gateway of
hotel finance, facilitating the flow of capital with their legal skill,
hospitality industry knowledge and ability to find the right �fit� for
all parts of the capital stack. Because they are part of the very
fabric of the hotel industry, they are able to help clients identify key
business goals, assemble the right team, strategize the approach to optimize
value and then get the deal done. Jim is the author of the Hotel
Law Blog, www.HotelLawBlog.com.
He can be reached at +1 310.201.3526 or [email protected]. |