|By Douglas Hanks, The Miami
HeraldMcClatchy-Tribune Regional News
Oct. 4, 2007 - Condo-hotel projects once were so hot in South Florida that Donald Trump planned two in Fort Lauderdale. Now he's back down to one amid cooling enthusiasm for the novel real estate product behind much of South Florida's recent hotel boom.
The celebrity developer expressed confidence in the Trump International Hotel and Tower under construction on the northern end of Fort Lauderdale Beach. But his partners are worried enough about condominium sales, he said, that they've suspended plans for the Trump Las Olas Resort to the south.
"They want to wait until the market comes back. And I agree with them," Trump said. "At this moment, to build in this market would be foolish."
Other developers are putting the brakes on condo-hotel projects, too. Smith Travel Research says the 7,629 condo-hotel units under development in Miami-Dade County this summer represents a 28 percent drop from a year ago.
Ugo Colombo and his partners scrapped plans to sell off rooms as condo-hotel units at the Cipriani in Miami Beach, saying they'd rather run the former Saxony hotel as a traditional resort with a separate tower of residential condos.
Jorge Perez's Related Group froze sales of condo-hotel units at its two Viceroy projects in South Beach and Miami as executives decide whether to keep the units as standard hotel rooms.
"We're kind of weighing the market right now," said Bill Thompson, head of the Viceroy project on Miami Beach.
While the depressed housing market clearly plays a dominant role in the condo-hotel pullback, the hybrid real estate product -- unit owners can rent out their condos to hotel guests -- faces other challenges now being magnified by the housing slump.
National hotel chains have tempered their enthusiasm for condo-hotels, refusing to lend their brands to projects unless developers pledge to leave a large chunk of rooms unsold. With hotels charging record room rates, lenders and others see the lodging sector a better bet than condominium real estate.
And with the first generation of new condo-hotel projects up and running, some developers are facing buyers disappointed by their units' monthly returns. Two recent lawsuits against projects in Marathon and Las Vegas accuse developers of securities fraud for touting condo-hotels as lucrative investments that ended up yielding weak returns.
Edgardo Defortuna, the Miami developer planning a Mandarin resort at the site of Fort Lauderdale's Ireland's Inn, said the strategy remains selling condo-hotels there. But that could change.
"It does today make a lot more sense to at least consider the possibility of doing a straight hotel," said Defortuna, president of Fortune International Realty. "Certainly the market has changed, and it's a lot more favorable toward regular hotels."
A soaring real estate market helped scramble buyers' expectations, since many condo-hotel units sold at prices largely divorced from what vacationers would pay to stay there, said Gregory Rumpel, a broker with Jones Lang Lasalle Hotels.
He noted the "old adage" that developers should assume $1 in rental revenue for every $1,000 they spend building a hotel room. So a room that cost $300,000 to build should rent for about $300 a night. But some condo-hotel units in South Florida sold for $600,000 or $800,000 -- meaning they should rent for as much as $800 a night.
"We just don't get that kind of rates here," Rumpel said. "New York maybe. Not here."
Condo-hotel sales helped bring a number of premier lodging brands to South Florida, from the new St. Regis in Fort Lauderdale to Miami's Four Seasons. Only Las Vegas and Orlando have more condo-hotel units under development than Miami-Dade does, according to Smith Travel.
And while Broward ranks as the nation's 36th largest lodging market, it finishes sixth in terms of condo-hotel activity, with nearly 2,800 units under development.
Rumpel and others see the condo-hotel product enduring the current real estate downturn, but with a shift from real estate speculators to those more interested in owning vacation homes than turning a profit by renting out hotel rooms.
"For an occasional user, there is no better buy than a condo-hotel," said Dante Alexander, president of the National Association of Condo-Hotel Owners. Along with generating more rental income than typical vacation condo, "the beauty is somebody else takes care of it for you."
For sure, developers continue selling the concept here and in other resort destinations. Stanley Levine and partners hope to sell 17 units at their new Browns Hotel and Marina in Bimini, Bahamas. The Mondrian on South Beach reports strong sales for its West Avenue location.
And with 70 percent of the units sold at the Trump International Hotel in Fort Lauderdale, the real estate mogul whose name adorns about a dozen condo-hotel projects around the world predicts a bright future for the product -- particularly in popular vacation spots like South Florida.
"You get income pretty easily, because the hotel market down there has been pretty good," he said. "I find people really like it."
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Copyright (c) 2007, The Miami Herald
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