The buyers are investors in hotel-condos, a real
estate product that combines the flexibility of
ownership with the branding of some of New
York's top hotels. Popular in the rest of the
country, hotel-condos are just starting to pop
up in New York in significant numbers for the
first time.
Unlike simple converted condominiums -- which
owners can use as they please -- hotel-condo
units are fully furnished units that can be used
by their owners for up to 180 days and nights
per year in most cases. The plus is that the
owners can invest in real estate while having
access to luxurious hotel amenities like a spa,
gym, room and personal butler services.
The remaining time, the units' owners return the
rooms to a rentable pool run by the hotel. As
the units are rented out, the owners receive a
split of the income.
Two such projects were announced last month,
with Donald Trump -- among the first developers
to do a hotel-condo in New York -- submitting
plans to build a 45-story high-rise at 246
Spring Street, which Trump says will be the
tallest building in SoHo. A new project was also
announced for 12-18 West 55th Street, by Lincoln
Property Company of Dallas.
The 55th Street project is right next to the St.
Regis New York, which is also selling
hotel-condos. In March, the St. Regis offered 24
condos on two floors as part of its hotel-condo
program.
These units are priced at $1.7 million to $7.3
million -- for sizes ranging from 450 square
feet to 1,550 square feet (hotel-condos
typically run larger than the average hotel
room).
In addition to the more than
$3,000-per-square-foot purchase prices, the
units come with pricey monthly fees of $2,900 to
$10,400. An additional two floors of 22 suites
are offered through a fractional share program.
About 30 percent had been sold at press time.
Lori Ordover, senior managing director for
Corcoran Sunshine Marketing Group, which is
marketing the St. Regis and the Trump SoHo Hotel
Condominiums New York, said that hotels with
condominiums started appearing on the market
more frequently following a 2002 federal law
change classifying hotel-condos as real estate
as opposed to securities.
The revised classification offered a viable way
to distribute profits to owners, Ordover said.
In addition, Ordover points out that
hotel-condos are "attractive to developers as a
financing tool."
In New York, the city's first foray into
successful hotel-condos was considered 1998's
Trump International Hotel and Tower at One
Central Park West. Also in the Columbus Circle
neighborhood is the Mandarin Oriental at the new
Time Warner Center, which is considered the most
luxurious.
Brenda Powers, a Brown Harris Stevens broker who
herself owns a Mandarin Oriental hotel-condo,
said she is seeing an increase of interest from
people who live in the hurricane-afflicted Gulf
Coast region as well as from corporations
looking to pamper their top executives while
investing in real estate.
Ordover said other new projects in the works
include a 70-room boutique development on 45th
Street, as well as another project on Fifth
Avenue.
The Plaza Hotel is also selling hotel-condos.
The post-renovation Plaza will include 152
hotel-condos, which were expected to hit the
market by July 1. Unlike the common ownership
use cap of 180 days and nights per year, the
Plaza's is set at just 120 nights per year.
While those buying into the concept in New York
seem to embrace these policies, a few social and
economic barriers got in the way of this trend
getting off its feet here. The booming
residential real estate market ate up a lot of
existing hotels by way of conversions, said
Julius Schwarz, executive vice president at the
Bayrock Group, which is the managing partner for
the Trump SoHo project.
"There have been a plethora of residential
properties coming on the market and a lot of
conversions," he said, adding that, in a red-hot
real estate market, no one felt the need to try
out a product that "had not been tested in New
York."
These tides have shifted in part because of a
booming lodging market in the city and a weak
dollar internationally. On a broader scale, baby
boomers are retiring and buying second and third
homes, and interest in real estate as an
investment remains strong, Ordover said.
When it comes to the market for hotel-condos,
Fernanda Forman, St. Regis' director of
residence marketing, said that the project is
attracting international customers familiar with
the hotel's brand.
By contrast, Schwarz said that he projects
interest from buyers living in the tri-state
area who work frequently in Manhattan.
"The average buyer might live in the tri-state
area, but comes to city on business quite a bit
and needs a place to stay when they're here,"
Schwarz said, adding that people "like to say
they own an apartment in New York."
The Trump project in SoHo will have 400
hotel-condo rooms and suites, a spa and a
high-end restaurant. The project, located on the
edge of SoHo three blocks from the Holland
Tunnel, could begin construction this year
pending approvals. The Sapir Organization is
also partnering with Trump in the development in
addition to Bayrock.
While it is possible to secure a mortgage for
hotel-condos, industry sources interviewed said
that most buyers purchase these luxury
properties outright. As far as income, legally,
sales agents are forbidden to discuss possible
returns on those days when the owner is not
residing at the property. However, the hotel can
discuss its average nightly fee and its
occupancy rate based on industry-wide research.
Unsurprisingly for business people working in
this segment of the industry, the sources
interviewed expect the hotel-condo trend to
accelerate -- for New York and other major
metropolitan hubs.
"We live in such a fast-paced rhythm of life,
it's crazy," Powers said. But with a
hotel-condo, "you just travel with a bag and
you're fine. It's the most convenient way of
traveling in luxury 24 hours a day."
;)
