World Wide Property Sales
Condo Hotel Trends
by Joel Greene
A Look at the Big Picture in Vacation Home Ownership
Condo hotels are one of the hottest products in today’s real estate market. New
properties are cropping up in different parts of the country and new buyers are
entering the market daily. Things have been moving so quickly in terms of condo
hotels, but sometimes it's worth taking a moment to step back and look at the
big picture.
Condo Hotels In General
There is a spreading enthusiasm about the condo hotel concept. More people are
recognizing its potential and therefore creating demand for more inventory.
Condo Hotel Buyers
The average buyer is 35-50 years old. Buyers for Florida properties, where condo
hotels are most prevalent, come from all over the U.S. On the international
front, most foreign buyers interested in U.S. property are from South America
and Europe.
The vast majority of buyers want condo hotel units primarily as investments and
are focused on the potential for appreciation with the side benefit of
hassle-free ownership. They see the ability to actually use their condo hotel
unit as a vacation home as important but secondary to their goal of investment
diversification.
Condo Hotel Market
Virtually every single property that has come on the market to date has sold out
in pre-construction. Most of these properties are mega high-rise buildings with
on average 200-500 units, and with some in excess of 1,000 units.
The speed with which these properties sell out is often as surprising to buyers
as it is to the developers themselves. For example, the MGM Grand in Las Vegas,
a 576-unit condo hotel, was expected to sell out in two years. It sold out in
two months! The Platinum, a 255-unit property in Las Vegas, also sold out in
just a matter of a couple months.
Hot Areas
South Florida continues to be an extremely popular area and one that has shown
strong and steady appreciation. As already mentioned, the condo hotel trend
which began in South Florida has now spread out west. Las Vegas is leading the
pack with many new condo and condo hotel developments in all price ranges being
built.
Growth in Florida
Looking at South Florida, it's easy to see what is happening. Miami Beach, the
hottest area, is all built up. There just isn't any undeveloped land. That's
causing a couple of things to happen. Developers are heading to the northern end
of Miami Beach (North Beach) and areas still further north such as to Sunny
Isles and Ft. Lauderdale.
A new trend is developers buying existing structures in Miami Beach and either
upgrading them, as in the case of The Mimosa which was the former Brazil Motel,
or knocking them down and starting over, as in the case of One Bal Harbour in
which a multi-family, high-rise building (Harbour House) was demolished and a
five-star condo hotel built in its place.
Finally, some properties are beginning to crop up inland. These condo hotels may
not have oceanfront views; however, they're within a few short blocks of a
beach. Because they're not on the ocean, these properties tend to be priced more
economically.
Properties
The most popular properties continue to be those with a franchise name, one that
brings a reputation for four- to five-star quality or a name that is already
well-known. A prime example is Canyon Ranch Living in Miami Beach. People
recognize the Canyon Ranch name and feel confident that this property will be of
the same five-star caliber as its Arizona counterpart. Of course, it doesn't
hurt that this property will have a 60,000 sq. ft. rooftop spa and fitness
center.
The Selling Process
A lot of properties take reservations of more than half the total project long
before they've even prepared their purchase contracts. This means that many of
the best units are reserved months before any money changes hands and often
before even the first spade of ground has been turned over. Those early
investors are seeing some amazing appreciation on their investments.
Prices
Like anything for which there is more demand than supply, prices keep going up,
up, up. Developers often raise their prices 3-5 times from when they start
selling until they sell out.
Developers are no longer discounting prices at the beginning of the selling
process when they are anxious to get a few sales under their belt. This used to
be common practice; it is no more because demand is so great.
There are sometimes, however, some price adjustments made at the very tail end
of the sellout phase when developers want to close out their property and move
on to their next project. Generally speaking, with regard to price, the best
time to get in is usually early on in the first pre-construction offering.
Quality
Most condo hotels being built are of four- to five-star quality. The reason is
two-fold: 1) There is demand for the types of services provided by four- and
five-star properties, and 2) Oceanfront land is so costly that it makes more
sense for the developer to put in a luxury property with units that he can sell
at a premium price rather than lower priced units.
Financing
It's getting a little easier to get condo hotel financing. There was a time when
most banks and mortgage companies weren't even familiar with the term condo
hotels. They now know it and also recognize the viability of these properties.
They are more accommodating in expediting these loans.
Contracts
Contracts that allow assignability have become rare. In the past, at some
properties buyers could place a deposit on a unit in the pre-construction phase
and then flip their unit prior to when they had to close. Developers now want to
be sure that they don't compete to sell their last few units with investors who
purchased early at pre-construction prices and are now re-selling them at below
the developer’s current prices.
Resales
Some condo hotel unit resales come on the market. Of course, this is to be
expected. Some of the earliest buyers now want to move on to something or
somewhere else. However, the resale market is still relatively small, and it's
hard to find a bargain.
Advice to New Buyers
How can buyers choose a condo hotel unit that will be a good investment? It’s
best if they can work with a real estate broker who specializes in condo hotels
and can make them aware of all products on the market. Aside from that, they
should look for the following elements:
- Location: Real estate is all about location. Beachfront properties in
South Florida have done exceptionally well in recent years. Their appreciation
has been significant. If you prefer a property that is not on the ocean, it's a
good idea to select one in an area where you can expect to have business driven
to your property, such as near a major convention center or in Downtown Miami
near the financial district.
- Franchise: It's always safest to go with a major company, well-known
internationally. Four Seasons, Hilton, Starwood, Rosewood, Setai and Trump are
excellent examples. Ask yourself, would you likely stay in a Holiday Inn for $69
or the independent hotel across the street for $62? Many investors or hotel
guests will pay a little more for the comfort level they get with a well-known,
well-respected franchise.
- Management Company: Compare the management companies and their rental
sharing program. You will likely feel more comfortable investing your money in a
condo hotel with an experienced, top-notch management company vs. an independent
operator. Also, it's worth noting that an established management company does
worldwide marketing and likely has a state-of-the-art reservation system that
will help ensure your unit is rented as much as possible.
Bio:
Joel Greene is the President of Condo Hotel Center located in Miami Florida,
which specializes in the sale of condo hotels and private residence clubs. Condo
Hotel Center is a division of Sheldon Greene & Associates, Inc. Located in
Miami, Florida, it is the south's largest and oldest brokerage firm in the hotel
field, having started in 1970. Sheldon and son, Joel Greene, have worked closely
together since 1988.
Joel has been referred to as an expert in the field of condo hotels and private
residence clubs and has been interviewed for various articles on the subject,
including The Wall Street Journal, The New York Times, Vacation Ownership, The
Florida Business Review, and several United Kingdom magazines, New
Horizons-Florida and Financial Times.
Visit Joel’s web site for more information on condo hotels and private residence
clubs. www.condohotelcenter.com.