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New York

“Condotel” development on the upswing

Cities like New York lead development of properties combining luxury homes, hotel amenities

From left: The Baccarat Hotel and Residences at 20 West 53rd Street, Residences at the Williamsburg at 135 North 11th Street and Cassa Hotel and Residences at 40 West 45th Street
From left: The Baccarat Hotel and Residences at 20 West 53rd Street, Residences at the Williamsburg at 135 North 11th Street and Cassa Hotel and Residences at 40 West 45th Street

Combination hotel and condominium properties, a hot concept prior to the real estate crash in 2008, are now back in force.

Major U.S. cities like New York City, Miami and Los Angeles are leading the development of properties that combine a demand for luxury homes with high-end, full-service hotel amenities at premium prices.

“You are seeing more and more condos that are associated with a hotel brand,” LeFrak Organizaton chief Richard LeFrak, who is developing 1Hotel & Homes South Beach with investor Barry Sternlicht, told Bloomberg News. Residents, he said, only need to “make one phone call. ‘Change the linens, put food in my fridge, get my car ready.’ They don’t have to bother with organizing a lot of things. It’s a big draw.”

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The U.S. hotel industry, on the rebound since the financial and property-market meltdown in 2008, saw room rates reach a record high in the first five months of 2014, according to data from research firm STR cited by Bloomberg. Through May, the average hotel price hit $113.58 per night, up 4.1 percent year-over-year.

Still, hotel financing can be difficult to obtain, making the “condotel” model an attractive one for developers seeking financing. In some cases, residences are connected to the lodging segment so that owners can take advantage of hotel amenities, thus enabling developers to ramp up unit prices.

“It’s still hard to finance a pure hotel play,” Bruce Ford, senior vice president and director of business development at Lodging Econometrics, a Portsmouth, N.H.-based consulting firm, told Bloomberg. In big cities, he said, “it’s just very expensive to build. So until the hotel is completed and returns money, you can sell condos and finance the hospitality component. The hotel component in turn will provide you with long-term cash flow.” [Bloomberg News] — Julie Strickland