For some Manhattan luxury real estate buyers, half a year is better than none.
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.”