Dec. 26, 2003 - Cole Porter did it. So did Frank Sinatra, the Duke and Duchess of Windsor, Gen. Douglas McArthur and John F. Kennedy. 

They all lived in style, with a capital "S," in posh in-town hotels. 

In Manhattan, of course. 

But now there are signs that the ultraluxe life is gaining ground elsewhere--including Chicago. 

In two separate ventures, developers are betting the relatively staid Midwest is ready for the life afforded by an in-town pied-a-terre, albeit on different terms than the long-term leases proffered by such icons as New York's Waldorf Towers, a boutique hotel adjacent to the Waldorf-Astoria. 

Both Chicago projects are rolling out a hybrid product new to this market and relatively new nationwide: elegantly appointed and impeccably serviced hotel suites that are sold as condominiums, then rented out in the owner's absence by the hotel management, with some proceeds going back to the owner. 

The two projects are reporting strong early sales, particularly among suburbanites and other Midwesterners who want a part-time residence downtown. 

"They've been selling like popcorn," said David Pisor, general partner of Elysian Development Group, which is including about 72 condo-hotel units as part of a 146-unit hotel in a $150 million hotel and residential project set to open in 2006 at Rush Street and Walton Place on the Gold Coast. 

Fifty-two units have been sold in the six months since the project was announced, with prices ranging from $500,000 to $700,000 for the one-bedroom suites. 

The Trump International Hotel & Tower, a $600 million hotel and residential project slated for the riverfront site of the current Chicago Sun-Times building, will include a 192-unit condo-hotel when it opens in mid-2007. 

In its first eight-week marketing period, the Trump development sold about 50 one- and two-bedroom suites, which start at $559,000 and head upward to more than $1 million. 

The tower's 326 regular condominiums have been selling at a faster clip, with about three-quarters sold in the eight-week period. 

But given that condo-hotel units are new to this market, the Trump Organization expected they would sell at a slower pace, said Charles Reiss, senior vice president. 

"We're thrilled with that number," he said. 

Ironically, these products for the financially flush were born, at least in part, as a way for hotel developers to raise money in trying times. 

"We're in a situation where it's very difficult to get financing for a hotel," said Ted Mandigo, owner of TR Mandigo & Co., a hotel consulting firm in Elmhurst. "Twenty years ago, you could get 100 percent financing ... today you're lucky to get 65 percent." 

Under the condo-hotel model, developers "get individual investors to provide rooms for the rental pool," noted Jim Kinney, president of Rubloff Residential Properties. 

"I think this is how a lot of hotels will get developed for the next year or two," said Arthur L. Buser Jr., managing director of Jones Lang LaSalle Hotels. "It allows a developer to capitalize at a lower cost than going to a bank or investment fund." 

The concept also may resonate with aging Baby Boomers, who are taking advantage of low interest rates to buy second homes, primarily in resort areas. 

"It's really too soon to comment on its success," said Scott Berman, partner in the hospitality and leisure group at PricewaterhouseCoopers. "But there are probably half a dozen projects in the Florida market that are selling very well." 

Buyers have two main expectations: economic return and a swanky home with 5-star services in a prime location. 

"People who buy condo-hotel rooms expect that the [rental] revenue they receive will pay for part, if not all, of their debt service," Buser said. 

And some hope to get a return over and above their costs. Owners who rent out their place for most of the year may see annual returns of 5 to 10 percent, said Reiss, of the Trump Organization. 

"But we can't guarantee hotel rentals or rates," noted Tere Proctor, director of sales for the Trump project in Chicago. 

Chicago attorney James M. Duggan was driven by his heartstrings, and his investment goals, when he decided to buy a one-bedroom suite at the Elysian Hotel. 

A year and a half ago, he and wife, Laura, sold their Lincoln Park condo and moved to a four-bedroom Italian Renaissance-style stucco home in Lake Forest. They live there with their 3-year-old daughter, Grace, and 7-month-old son, Bennett, but found that they miss the city life. 

The couple, both 34, enjoy going out to dinner, stopping by a pub or browsing the shops, said Duggan, an ebullient personality who confesses to having had a crush on his wife since they were 8 years old. 

But so far, his efforts to woo his wife to a weekend get-away at a five-star downtown hotel have failed. 

Having small children at home is a definite factor, Duggan said. 

"But she also doesn't want to be a tourist in her own town," he said. "To have to pack up and check into a hotel. It's not like a place of your own." 

And he likes the investment potential as well. 

"In my demographic, although we still have money in the stock market, it's obvious we've been spurned," he said. "So there's a lot of interest in real estate." 

"This provides a rental income stream and I do not have to be that involved," he said. "And I can deduct the mortgage and interest payments, like on any home, and I get the benefit of depreciation." 

The two Chicago projects offer different financial arrangements to buyers. 

Buyers of Trump suites can use them as much or as little as they like. They will pay monthly condo assessments and hotel expenses, which together can run $2,000 or more. But when they put their units up for rental, they receive 100 percent of the rental income. 

And nightly rents could range from $430 to $1,600, depending on the unit, Proctor estimated. 

At the Elysian, buyers can use their suites full time, or pick from three rental plans, which would give them use of their suite for 14, 35 or 90 nights a year. 

The hotel pays the monthly assessments of owners in the rental program, but passes along only 20 to 42 percent of the gross rental receipts. 

In both cases, owners' returns will depend on what kind of occupancy rates and room rates the properties can command. 

"If you owned one in 2000, you'd be happy, but in 2001, you would not have been happy," noted Mandigo. "In a recession, there may be insufficient cash flow for you to finance your unit." 

Concept still unproven in city 

How well the model will play in a big-city environment such as Chicago, versus a resort area, remains an open question. 

"It is a bit pioneering," said Buser, of Jones Lang LaSalle Hotels. "If you look at the demographics of the buyers, they are not corporations but people who are going for vacations, and they go to resorts more often. 

"But some cities--San Francisco, New York, for example--attract a fair amount of leisure travel, so they are sensible locations for condo-hotels," he said. "Chicago may be a bit more of a challenge. Certainly in the summer months it is one of the best places to be, but aside from that, one doesn't vacation there as much." 

But Chicago has been growing as a leisure destination, and other observers are less cautious in their outlook. 

"In Chicago, the time certainly is right," said Kinney, of Rubloff. "It works as a nice alternative, rather than buying something that sits there all year unused." 

The Ritz-Carlton Chicago and the Four Seasons Hotel Chicago both offer extended rentals of luxury residences on a small scale. 

And Christoph Schmidinger, general manager of the Ritz-Carlton, says his hotel has experienced steady demand for these offerings over the past 27 years. 

"It's a very luxurious way to live if you want the privacy of a personal apartment but you still want the services of a hotel, the liveliness of a hotel, where you can step out and mingle with other customers, get to know the staff," he said. "You're never alone, which some people love." 

The condo-hotel model has been part of the mix at the Trump International Hotel and Tower in New York since it opened in 1997, and Reiss says the property has been "performing wonderfully." 

"It was the experience there that became a factor in Chicago," he said. "We felt it was time to do another one. In fact, we're looking at doing another one in Toronto." 

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(c) 2003, Chicago Tribune. Distributed by Knight Ridder/Tribune Business News. MAR, FS,