Buyers in condo-hotels across the country are turning to the courts to
get their money back, alleging that condo-hotel developers violated
securities laws in selling the units. The buyers argue that purchasing
a residential unit in a condo-hotel is akin to buying stock, and the
sales should therefore have been regulated by the Securities and
Exchange Commission. The SEC would require developers to use agents
licensed to sell both real estate and securities. But developers’ lawyers
say the legal argument doesn’t make sense. The decisions in these court
cases could determine whether the condo-hotel model survives. [more]

Condo-hotels were all the rage in the mid-2000s, offering developers a
path to steady revenue and permanent profit, or so it seemed at the
height of the boom. The scramble to build these hybrid properties with
the best of both worlds — stable unit ownership to help cover
maintenance costs and steady tourism traffic to maximize revenue
potential — now lingers as evidence of the region’s overheating. The trend was short-lived, but a down market may resurrect it in
modified form. Jean Francois Mourier, CEO and founder of revPar Guru, a
hotel software company in Miami Beach, sees an inversion afoot: Developers are exploring the possibilities of transforming condo
properties in a market where there are fewer buyers than travelers
looking for a spacious hotel room complete with separate bedrooms,
bathrooms and kitchens. His company takes its name from the industry
abbreviation of revenue per available room, a critical measurement of
hotel performance. [more]

Like many real estate professionals whose conventional paths to profit
have been closed off, Joel Greene wants to find ways to make money
during the downturn. Greene, who built up a successful business based
in Florida brokering condo-hotel sales, recently turned his focus to
helping would-be buyers obtain a form of financing called
stock-collateralized loans. The loans, which use investment portfolios as collateral, are
non-recourse, so if a borrower’s portfolio drops in value over the
course of the loan term, he is allowed to walk away from the loan owing
nothing — though he still owns whatever he used the loan to buy.
Greene and others involved with stock-collateralized loans say they’re
increasingly being used to finance residential and commercial real
estate purchases. It’s a measure of the tight credit markets that this
alternative is gaining some traction.
[more]