What's Driving the Sale of Downtown Luxury Condos?

By Dennis Rodkin, Chicago Magazine

In the first few months of 2010, as some local developers slashed prices or staged auctions on their newly built condominiums, a small segment at the upper end of the condo market flourished. As Gail Lissner of Appraisal Research Counselors notes, “There are always wealthy people with the ability to buy.” The big difference lately is that those well-heeled folks have been shelling out princely sums to buy luxurious new condos in downtown high-rises. “These are not speculators buying cookie-cutter condos,” says Lissner. “By and large, they are buying to live in these really high-end, unique places.”

Consider these numbers: From the beginning of the year until the middle of May, about 40 downtown condos have been sold for $2 million or more—and most of those condos were in buildings that opened in the last two years. (Some sales may have not yet appeared in public records.) They ranged from an $8.182-million sale at the Elysian—the 60-story tower at 11 East Walton Street designed by Lucien Lagrange—to a three-bedroom unit that went for a little more than $2.24 million at Aqua, the much-praised skyscraper at 225 North Columbus Drive that Jeanne Gang designed for Magellan Development. (The Elysian sale was the highest price paid for a Chicago condo since November 2006, when a 61st-floor unit at the Park Tower—at 800 North Michigan Avenue—went for $8.275 million.)

What’s driving the sales? To update an old real-estate adage: timing, timing, timing. Many of these new elite homeowners made their decision to buy several years ago, while buildings were under construction or still in the planning stage—and before the recession punctured the real-estate boom. With those condo towers now ready for residents, the folks who agreed years ago to buy are finally inking the deals.

That’s generally what’s been happening at the Elysian, according to Caryl Dillon, who was the tower’s sales agent. Since January 1st, at least 16 buyers there closed on condos priced at $2 million or more (in addition to the $8.182-million sale already mentioned, one condo went for $7.25 million and another for $6.9 million). That’s on top of a first round of December 2009 closings at $2 million and up. Meanwhile, at The Legacy (which recently opened at 60 East Monroe Street), three units priced at more than $2 million were among the first closings in the building—and usually the earliest buyers sign off on the earliest closings. (Since condos on a building’s bottom floors are often finished first, some lower-level, lower-priced units bought during construction can also be among the earliest closings.)

Buyers who signed contracts before the bust could have opted to cancel their contracts when the economy soured—as did numerous buyers of medium-priced homes. But “10 percent [the standard deposit on a condo] is a lot to walk away from” on a multimillion-dollar sale, Lissner says. Still, as she suggests, it’s also likely that for many of these rich buyers “their lifestyle hasn’t changed in the downturn.”

Janet Owen, a Sudler Sotheby’s International agent who works exclusively in the luxury market, points out that many rich people have not had to worry about the tight mortgage-financing climate that has contributed to the drag on the larger real-estate market. Mortgage lenders have been requiring bigger down payments, higher credit scores, and more detailed documentation of financial histories from average buyers. “These aren’t issues [wealthy potential homeowners] have to think about,” says Owen. On top of this, she notes, “their buying had nothing to do with the $8,000 federal tax credit.”

That is especially true of well-to-do buyers who made their purchase decisions recently. In early May, someone paid $2.3 million for a previously owned condo on the 51st floor of the Trump International Hotel & Tower (that building, at 401 North Wabash Avenue, opened in 2008). Another buyer spent $3.45 million in April for a 54th–floor condo at 55 East Erie that an investor had held on to since 2003. These new purchasers “are almost always cash buyers,” says Tere Proctor, who was the director of sales at Trump before returning to agency work (at Koenig & Strey Real Living). “They see the value in buildings like Trump and the Elysian, and they’re banking on knowing that whenever the market gets better, they will be holding valuable real estate.”

Read the full article and see building highlights here.

NOTICE OF MOVIE FILMING IN THE AREA

DW Studios Productions is currently filming scenes for the upcoming motion picture “Transformers 3” in the area. One of the principal locations in the film is Michigan Avenue in the vicinity of the Chicago River. Major filming with special effects is scheduled for Friday, July 16th, Saturday, July 17th and Sunday, July 18th from approximately 7am until 7pm. Scenes will include low flying helicopters and special effects such as gunfire, spark hits, explosions, fireballs and black smoke.


Please note the following proposed schedule for the area:

Tuesday, July 13th 8am to mid-morning: 1-2 helicopters flying closely at the top of the Trump Tower.

Thursday, July 15th 8pm – Monday, July 19th 5am: Michigan Avenue between Ohio and Wacker Drive will be closed. Lower Michigan Avenue will be available to vehicular traffic until Friday July 16th at 8pm. During these days, the loudest stunts and special effects will be filmed. Please note that gunfire and explosions will take place after 8am on Saturday, July 17th and Sunday, July 18th.

Saturday, July 17th and Sunday, July 18th from 7am throughout the morning: Precision skydivers with parachutes will be flying around the building and landing on the Michigan Avenue Bridge. They will be circling along the Chicago River. This will result in occasional closures for 10-15 minute periods for affected streets below the fly zone. This will include a lockdown of vehicular and pedestrian traffic. Areas expected to be affected include:
Hubbard between Clark and State
Kinzie between Clark & State
Dearborn between Wacker and Hubbard
State between Wacker and Hubbard
Wabash between Wacker and Kinzie

Monday, July 19th from 10am-4pm: 3 Base jumpers will be jumping from the Trump Tower roof to the south side of the Tower. The River Walk will be closed during this time. Additional closures may occur as necessary.

Tuesday, July 20th from 10am-4pm: If weather is inclement on Monday, July 19th this is the back-up date for the base jumpers.

Monday, July 19th - Wednesday, July 21st: Filming will occur at Hotel 71 and expected closures include Wacker from Michigan to Wabash as well as intermittent traffic control on nearby streets.

Saturday, July 24th – Tuesday, July 27th and Saturday, July 31st - Sunday, August 1st: Filming will occur at 35 E. Wacker and expected closures include portions of Wabash and Wacker as well as intermittent traffic control on nearby streets.

Tuesday, July 27th: Filming will occur in immediate areas surrounding Trump Tower and there will be intermittent traffic control in the area. Filming will also include helicopters.

Please note that businesses in the affected areas are scheduled to remain open during this time. Bus stops on North Michigan Avenue between Ontario and Wacker will be relocated. Signs are expected to be posted. Please be advised that loading zones for boats along the river may be relocated and signage will be posted indicating the alternate loading zones.

Public Assistance personnel will be placed at the pedestrian lock-up points and will provide detour information. The personnel will be wearing yellow shirts with the “Transformers” logo.

Chicago's Trump Hotel towers above U.S., Canadian rivals

The Donald's got The Best, at least according to Travel + Leisure magazine.

Trump International Hotel & Tower Chicago is ranked in the magazine August's issue as the No. 1 large city hotel in the U.S. and Canada.

The 339 rooms in the hotel are on floors 14 through 27 of the 92-story tower at 401 N. Wabash -- the former site of the Sun-Times Building.

Donald Trump, in a statement, called the honor "tremendous."

"With Trump Hotel Collection, we set out to invent the next generation of luxury hospitality," said Trump, chairman and president of The Trump Organization. "We are committed to bringing the best design, service and amenities to the market."

The Peninsula hotel at 108 E. Superior ranked No. 2 on the Travel + Leisure list.

July 9, 2010, SUN-TIMES STAFF

Take A Tour At Trump

Take a tour at Trump Tower with Tricia. This 3 bedroom, 3.5 bath has just been reduced in price. Now only $2,475,000!

First Time Buyer Event at the New Park Monroe

Thursday December 3rd, Park Monroe, the Tricia Fox Group of KW Luxury Homes and Guarantee Mortgage are hosting a First Time Buyer event at the newly opened Park Monroe Penthouse Room at 65 East Monroe from 5-7:30. Guests will enjoy cocktails and appetizers and a real estate discussion followed by a tour of several hand-picked Developer Units The new condominium project offers spectacular views and unique roof top amenities, perched high above the 55 East Monroe office building.

Tricia Fox states, "This is a unique opportunity to talk real estate and view the New Park Monroe. Andrew Surma from Guarantee Mortgage will discuss first time or repeat buyer incentives and the current market conditions. 2009 has produced the Tricia Fox Group's second best year in real estate sales. Interestingly, our group results mirror the Gold Coast area stats - most of our sales were either Luxury Category over $1.2m or First Time Buyer category, under $500k. Tax incentives, lower interest rates and good old-fashioned great pricing favor the latter New Buyer Category. Why the surge in executive luxury sales? An educated guess is our buyers seem to want a nice place to live and enjoy and are moving away from the financial corrections of 2008."

The next Fox Group informational seminar will be on December 16th at 5:30 at the new Trump International Condominiums. The Fox Group has sold in excess of $42m at Trump this year. There will be informative discussions from financial industry expert Justin Cozart and Realtor Tricia Fox relevant to the luxury market place, followed by holiday wine and appetizers and a tour of available Trump Residences. Justin Cozart states, "2009 is the year to get a great deal in real estate, from negotiated prices of inventory to outstanding interest rates".

Interested parties for either event can RSVP to attend by contacting marygeorge@triciafoxgroup.com or call 312-981-5361.

Trump International Hotel & Tower were honored by the Chicago Architecture Foundation

Donald Trump's Trump International Hotel & Tower and Kirkland & Ellis LLP's 300 North LaSalle were honored by the Chicago Architecture Foundation on Thursday at the group's annual Patron of the Year awards luncheon.

The coveted honors, given to those who commission buildings, are among the few awards handed out in town that are kept a secret until they're announced from the stage.

This year was no different, as attendees made off-the-cuff bets as to who would win.

The afternoon affair sponsored by Stein Ray & Harris LLP was held at the University Club just off Michigan Avenue and featured a number of high-profile guests, including Michael McCaskey, chairman of the board of the Chicago Bears, and Sunny Fischer, executive director of the Richard H. Driehaus Foundation.

The two served on the jury led by famed architect Stanley Tigerman, who drew a crowd of visitors around his table in his first public appearance since being hospitalized for heart-bypass surgery.

"It's good to be out of there," said Mr. Tigerman, whose recent work includes the Holocaust Museum in Skokie.

Other projects honored were the Charles H. Shaw Technology & Learning Center and Richard J. Klarchek Information Commons in the institutional category and the Chicago Cultural Center: Preston Bradley Hall Dome Restoration and Chicago Main Branch Riverwalk in the government category.

Copyright © 2009 Crain Communications, Inc. Posted by Shia K.

2 Trump Hotel Unit Owners Face Foreclosure

(Crain’s) — Donald Trump’s ritzy new downtown hotel is attracting guests no property owner wants to see: foreclosure lawyers.

In another bad sign for the New York developer, lenders have filed foreclosure suits on two condominium-hotel units in his 92-story Chicago skyscraper, which has been clobbered by the condo bust and the worst hotel market in decades.

The investors who bought the two units from the developer last year are trying to sell them at steep discounts through so-called short sales, or for less than the debt owed on the units. One hotel room is on the market for less than half of what it sold for in March 2008.

Foreclosures and short sales have become routine in the current real estate market, and two lawsuits don’t represent a trend. But they rarely happen so quickly at high-end projects like the Trump International Hotel & Tower, which just opened last year.

The cases also raise questions about how low condo-hotel prices in the riverside project can go. And one broker with listings in the building expects more foreclosure suits in the future.

“No question about it,” says Andrew Glatz, president of Chicago-based brokerage Crown Heights Realty. “There will be a flood of them.”

Mr. Glatz is trying to sell a condo-hotel unit on the 20th floor for $379,000, less than the $493,589 loan balance on the unit. The owner bought the room from a Trump affiliate for $664,000 in February 2008. Wells Fargo Bank N.A. last month filed to foreclose on the unit.

Wells Fargo has also sued to foreclose on a unit on the 24th floor with an original mortgage of $712,000. The unit is on the market for $389,900, 56% less than the $895,000 Trump sold it for in March 2008. Wells Fargo would have to approve both sales if the investors can’t repay the loans in full but want to be released from the mortgages.

Mr. Trump says the two suits and potential short sales say nothing about the project at 401 N. Wabash Ave., which includes 486 residential condos and 339 hotel units. The development is “doing very nicely,” he says, and foreclosure suits in new condo developments are “common all over the place,” not just in his building.

Still, Mr. Trump ran into major loan problems of his own last year, when he and a lending syndicate led by Deutsche Bank Trust Co. Americas sued each other over a past-due $640-million construction loan. The two sides signed a truce in March, and Jason Greenblatt, general counsel and executive vice-president of the Trump Organization, says he expects to reach a more formal settlement in the coming weeks.

That would be good news for the project, which has struggled with slow sales amid the depressed condo market. Sales of residential condos are stuck at 365 units, or 75% of the total, and haven’t really budged in three years, according to Appraisal Research Counselors, a Chicago-based consulting firm that tracks the downtown condo market.

Investors can also buy hotel suites in the building, like they would a residential condo, with the option to occupy the units or have them rented out. But condo-hotel sales stalled out a few years ago and are currently stuck at 191 units, according to Appraisal Research. Though a hot concept during the boom, the condo-hotel has been a tough sell during the bust. Skeptics say hotel units are a bad investment structured in a way to benefit the hotel developer, not the owners.

In a lawsuit filed in September, a Trump condo-hotel investor alleged that the company formed to develop the project broke earlier promises over the hotel units, deciding, for instance, to keep profits from the hotel’s ballroom and meeting space after stating earlier that the money would go to the hotel unit owners. Mr. Greenblatt says he can’t comment on the complaint because hasn’t seen it.
A group of four condo-hotel investors filed a virtually identical suit against the project in 2008 that “was resolved to everyone’s satisfaction,” says Shelly Kulwin, an attorney for the investors in both suits. Terms of the settlement are confidential, he says.

The market for hotel units is especially thin these days because many lenders, leery of the risks, won’t finance purchases of them. And the hotel market is in a deep slump, driving down occupancies and room rates at many hotels. Declining room revenues would make it tough for many owners to cover the mortgage payment, property taxes and assessments.

Unless an investor can buy a unit at a steep discount, owning a hotel suite “absolutely doesn’t make sense in today’s market,” says Mr. Glatz, the broker. “Right now, people have to feed them on a monthly basis and they’re losing money.”
While acknowledging the difficult hotel market, Mr. Trump says his hotel is doing well and has managed to keep its occupancy high. He declines to disclose the hotel’s occupancy or average daily room rates, but Mr. Glatz says the hotel has slashed rates to fill rooms.

Where the hotel market goes from here will be a key factor determining the future value of the Trump condo-hotel suites. But some units in the building could be poised for a big fall based on estimated values of comparable properties; the recent sale of a minority stake in the Peninsula Chicago, one of the city’s most expensive hotels, valued the property at $460,177 a unit, well below the $1-million-plus Trump received for some of his hotel units.

Distress could play a role, too. While two short sales aren’t likely to depress values of other units in the building, a higher number could, says Gail Lissner, vice-president of Appraisal Research, the consulting firm.

“I think it’s all about the quantity,” she says.
By Alby Gallun, Nov. 18, 2009

The condo hotels are a separate company from the residential units which continue to sell well. Maybe Trump should buy them back and just run this as a hotel like Elysian is doing? The hotel is beautiful and is has a high occupancy - and having a hotel instead of hotel condos would solve the problem of difficult financing for those beautiful residential homes at Trump!

Terriffic Trolley Tours

Innovative Marketing



Tricia Fox has always done things a little bit differently from other real estate professionals in her downtown Chicago area. From art shows to shopping center kiosks to home-buying seminars that draw more than 500 people, Fox, broker of Tricia Fox Group of Keller Williams Luxury Real Estate in Chicago, does more than “take a listing, put it in the MLS, post it to a few websites and send out a postcard.”

So, when the weather turned cold, Fox decided to add luxury home tours by limo to her marketing repertoire. “Our offices are located on Michigan Avenue, and we specialize in properties in this area,” says Fox, who had 22 sales associates on her team and two staff members. The free limo tours took prospective buyers to several condominium listings in that area. But, it was so popular that Fox had to come up with a plan B. “We had such a great turnout that we decided to rent a trolley car so that we could seat more people,” she says. Fox recently took out her first trolley tour. “We had 32 seats, and they were all taken [15 couples]. Some of our team sales associates brought buyers on the tour, some sales associates waited at the properties,” she says. The group looked at seven resale properties and, according to Fox, three couples have taken a second look at some of the properties.

The trolley tours are free to prospective buyers and last about two hours. Each tour costs Fox about $1000 and she’s planning two a month. “Brunch is a good time of day for the tours,” says Fox.

Here are Fox’s tips for running a successful tour:

1. Plan ahead. The hardest part for Fox is the front-end planning. “You have to choose properties, make arrangements with owners [all properties are listed by Fox or someone on her team], decide who to invite and get the invitations out.” Fox has about 12 agents participate in the tours, so it’s vital to schedule several weeks in advance to ensure the entire group knows their assignments. “We have two agents at each site.”

2. Choose properties wisely. Fox only chooses vacant or sparsely furnished condos to show on the tour. “With so many people walking through the listing at once too much furniture makes it difficult,” she says. She also picks a price range for each tour. For example, one tour may feature lower-end properties that first time homebuyers or part-time residents may like; another tour might feature properties between $1 and $2 million. She then offers a mix of properties ranging from those with beautiful views to those with distinctive architecture.

3. Serve refreshments. Fox always serves refreshments at each property. “We may start with coffee at the first condo, then move on to wine and cheese. But, at the last property we always serve chocolates and champagne to make it festive,” she says.

4. Encourage conversation. Between properties, Fox visits in the trolley with each couple to answer questions. She also brings along a couple of mortgage brokers who can answer financing questions.

5. Use signs. Fox had some custom signs made that she can hang on the trolley for each tour. She also features brochures and signs at each listing.

6. Follow up. In addition to a feedback form she hands out, she has a follow up system for her team. “Individual agents follow up with the buyers and set up more appointments,” she says.

While she’s only done one tour, she’s learned a valuable lesson. “Next time, I would push people through the properties a little faster. We ended up with a lot of questions that could have been answered in the trolley on the way to the next property.”

It’s too soon to know exactly what kind of return on investment Fox will see. “Who knows what the actual return will be, but when you compare that cost to a print ad, the trolley is much more effective. It has the impact of personal touch. You can meet with people in person and really get to know them,” she says.

by Tracey Velt

Luxury Home Tour by Trolley

For Release

Contact: Tricia Fox (312) 446-7373
triciafox@gcchicago.com

Luxury Home Tour by Trolley
Eases Logistics for Buyers and Sellers

Chicago, August 23, 2009. All aboard! Sunday, August 23rd marked the first Luxury Home Tour by Trolley, a new marketing effort by the Tricia Fox Group of Keller Williams Luxury Homes. Prospective buyers come by the Keller Williams Gold Coast office, 676 N. Michigan Avenue, and – off they go with knowledgeable professional Realtors to tour the condos or homes on the tour. This week the lucky participants visited: #3605 at 100 E. Huron, a 2880 sf 3BR/3BA at Chicago Place at 700 N. Michigan Avenue; then #2904 at 530 N. Lake Shore, a penthouse 2000 sf 3BR/3BA, then a New York Style Duplex overlooking the Millennium Park in the Cultural Mile at 310 S. Michigan, also a 3BR/4BA – and, finally, several new homes in the brand new Trump Chicago! Prices ranged from $995 to over $2.6m. Participants’ comments included, “Great use of our time!” “We learned a lot, saw even more, and enjoyed the company and treats”!

“This is a fun and informative way to see a lot of options in a short amount of time and allows us to discuss real estate here in the Gold Coast,” says Tricia Fox, President, Tricia Fox Ltd. “I believe that this is the year to buy in Chicago. Great inventory, motivated sellers, low interest rates and government incentives all combine to make this the year to buy!”

To jump on board to see all the “best of the best” condos in the Gold Coast, potential buyers are invited to text or call 312-446-7373 or e-mail triciafox@gcchicago.com.

“While others may be discouraged about the housing market,” says Ms. Fox, “we find the Luxury Home Market in Chicago to be alive and well and thriving. In fact, in our Gold Coast market niche, The Tricia Fox Group recently turned in a stellar 2008 year with sales totaling $70 million, their second best year ever. This year the Group has already sold and listed properties valuing over $40mm in Trump Chicago alone. And the group is bullish on the remainder of the year!” All aboard!!

TRUMP IS FOR SALE…. RESALES ARE A BARGAIN…THE TIME TO BUY IS NOW…..

I have personally sold over $40m in real estate at Trump and just recently purchased an in-town for myself. There are terrific under-market deals right now as some early buyers are unable to close and are willing to let their preferred first-buyer interests go at a loss to them. This resale opportunity at up to 40% off current Developer Prices will only last until the current sales close out or revert to the Developer. WE expect this window of opportunity to last only through July or perhaps August.

The building has terrific views, a 23,000 sf spa, hotel services, concierge, private owned parking, and a walking location to the Theatre District, Michigan Avenue, and dozens of restaurants. The newly enhanced river walk also adds to the appeal. But, mostly, this is one new building which actually did get built and has changed Chicago’s skyline.

We Are At the Nordstoms on Michigan Ave. - Check Us Out

Check us out at the Nordstrom Kiosk during mall hours 7 days a week.

Chicago Magazine Link:

http://www.chicagomag.com/Radar/Deal-Estate/April-2009/Housing-Bulletin-House-Hunting-at-the-Mall-and-in-Harbor-Country/

Terrific cocktail party with Signature Properties from Naples, Florida at TRUMP INTERNATIONAL CHICAGO

Here are a few pictures to share - January 15th we co-hosted a terrific cocktail party with Signature Properties from Naples, Florida at TRUMP INTERNATIONAL CHICAGO – over 130 people attended. The 20 degree below temperature was a reminder of why a place to escape to in Naples, Florida would be a very wonderful idea! Many prospects and several buyers attended and all commented on the terrific DVD which started with a chilly day in Chicago where the clients boarded a jet and ended on the same day, basking in sunshine and sipping a cocktail on the beach. The homes were also terrific – views, finishes, from $1million (Dunes) to $5m (Moraya Bay) - the ones directly on the water (Moraya Bay) are over 5000 sf!


View and reflection









Maxine Kroll, owner of Maxine Salon, husband architect Ron Bari, Tricia Fox Realtor Jean Hagerty









Liz Griffin and Craig and Erin Dunstan of Wheaten, buyers at the Moraya Bay Project










Frank DiJohn, entrepreneur/business owner and Mel Greenberg, entrepreneur, furniture business









Tricia Fox, and Glenn Griffin, Developer, Signature Properties, Naples, Florida












Jerry Nerad, hotel owner and original owner of parcel where development is and Ann Nerad and Patrick Griffin, Developer

Trump This

Chicago Real Estate Daily is reporting on a lawsuit filed against Donald Trump by a couple whose "friends-and-family" contract was declared null and void by the developer. We'll see what the courts say!

(Photo by Stephen J. Serio)

Trump Tower

After Labor Day, we start to get reflective. This was the Trump building just a year and a half ago. How time flies!

Condo Hotels: What to Check Out Before You Check In

About 20 years ago on the high seas of south Florida's real estate market, many dated condo hotels lacked quality and prestige. The scourge of changing tax laws made them less attractive investments and many conversion projects were sunk.

In the late 1990s came The Mutiny, a hotel that took over the condo hotel concept, according to Joel Greene, president of Condo Hotel Center, an Internet real estate broker.

The owners of the apartment building in Miami gutted their property and turned it into a condo hotel or condotel, reintroducing the concept to the area and generating a pirate's plunder for its buyers, with unit prices increasing 10 times from beginning to sell-out. Other developers began following suit, revamping old hotels or constructing them brand new.

"Today there are approximately 60 or more condo hotels at various stages of development in Florida," says Greene. "By 2008, there will be several hundred condo hotels, located throughout the U.S. and around the world."
But before eager adventurers raid this ship, they must be aware of what they are getting into, says Greene, or be fooled by a treasure that falls short of the legend.

Condo Fever

A condo hotel, as defined by Greene, is a large, usually high-rise property located on prime real estate and operated by some of the biggest hotel names like Trump (TRMP) , Marriott's (MAR) Ritz-Carlton, Starwood (HOT) and Hyatt. It is usually used as a second or vacation home.
Unlike a traditional hotel residence, however, the condo hotel unit allows individual owners to place their unit in the hotel's rental program when not in residence. The revenue generated from the rental program is split -- usually 50/50 -- between the hotel operator and the owner.
Despite the slowing real estate market, condo hotels are continuing to thrive, largely because 74 million baby boomers are looking for places to spend their money.
"Condo hotels are part of at least 1% of every hotel project currently being built," Greene notes. Condo Hotel Center is contacted by three or four new developers each week.
"It's a win-win situation for all parties concerned," says Greene. But beware if you believe you'll reap a queen's ransom, because you're in for a disappointment.

Buyer Basics

A condo hotel unit is a hassle-free investment on prime real estate. When in residence, five-star amenities are at the owner's fingertips; when the owner is not around, the hotel maintains the property. Perhaps most enticing, however, is the ability to generate income through the hotel's rental program, helping offset ownership expenses.
To maximize profits from appreciation, buy your unit in preconstruction stages, Greene advises. Early buyers of the Trump Chicago condo hotel, for example, saw a 95% increase in the selling price before the building was 75% sold out, he notes.
But if profit, not pleasure is your concern, consider becoming a landlord.
Condo hotels are not registered as securities and can't be sold as investments, says Andrew Robins, partner in the lodging and gaming practice at Proskauer Rose. Buyers should view them as vacation spots with benefits, not buried treasure.
Generally, your unit will generate some revenue to offset ownership costs, but don't expect sizeable annual returns. Under Securities and Exchange Commission regulations, developers can't guarantee occupancy rates or revenues, so a premium brand name will generate higher rental income, but the accompanying pricey operating expenses can surprise and frustrate residents.
"Growth makes me cautious because not every hotel will work as a condo hotel," says Howard Nussbaum, president and CEO of the American Resort Development Association.

Appreciation depends on the destination, he says, so do your homework.

Developer's Duel

For the developer, condo hotels make good financial sense because they can recoup much of their construction costs up front, even breaking even upon completion of the property, says Greene.
The developer receives approximately 50% of the revenue form the condo hotel rental program and retains whole ownership of the property's meeting facilities, spas, lounges and restaurants.
But despite the allure, hire a good attorney, Nussbaum cautions.

"The recent proliferation [of condo hotels] has made for a level of popularity and desire that creates the opportunity for mistakes," he says.

The biggest challenge for developers, says Robins, is how to reconcile the need of a branded hotel to control the guest experience with a unit purchaser's typical rights.
The legal structure varies by state. In Florida, for example, the condo unit owner has very little input as to how the building is maintained and operated in order to assure that the hotel standard is upheld. The developer retains control over the look of the building in carpets, lobbies and hallways.
"The theory behind the [Florida] model is that the buyer of the unit doesn't want to buy just any condo unit ... but rather a brand [that meets] certain standards in terms of physical and operational qualities of the unit and building," says Robins.
In the New York market, says Robins, the level of control a condo association retains over common areas can't be altered in most cases, and unit owners have more control over operating expenses.

"There is a lack of certainty of the brand's ability to really control the standards," says Robins, but New York is such an attractive market that developers and branded operators are willing to take that risk.

Most importantly, developers everywhere must avoid focusing on the economics of the rental program, lest they violate SEC regulations.

Prime Land and Hot Sand

The risks involved for all parties aren't stopping the wild crusade of condo hotels around the globe with condos in Mexico, Panama and Costa Rica leading the way because of their attractive price ranges. A Trump studio unit in Fort Lauderdale, Fla., for instance, costs about $700,000 but a similar sized Trump unit in Panama City may only cost around $300,000.

"Trump is the number one developer [in the business] ," says Susan Greene, marketing director for Condo Hotel Center. "His stuff is just gold."

The 423 residences in Trump Tower Honolulu sold out in one day.

Some of the best deals today are found in Dubai, says Joel Greene, "where theme parks that will total more than twice the size of Orlando's Walt Disney World are currently under development."
In the U.S., Greene recommends Las Vegas, specifically Vdara, a planned condo hotel in the MGM Mirage (MGM) CityCenter.
Koloa Landing, a residential resort community in Kauai, Hawaii, will complete its 323 resort condos by 2009.

"We're trying to raise the bar as far as luxury," says sales director Jeff Skinner.

The property will be a refreshing change from the dated hotels in the area, and Skinner predicts 80% of the residents will participate in the rental program.
And deeded fractional ownership residences, like The Ritz-Carlton Residences, combine residency with the legendary services of the Ritz Carlton Hotel Company, including personal chefs and concierge services.
"Instead of paying $5 million for a slope-side vacation home in Aspen, this new breed of buyer is purchasing a three-bedroom residence at the base of the mountain for approximately $300,000 and using it for four weeks or more a year," says Ed Kinney, vice president of corporate affairs and brand awareness for the Ritz-Carlton Club.
In short, if you want a prime vacation spot without hassle or strain, a condo hotel is smooth sailing -- just leave the treasure map at home.

Copyright

By Annika Mengisen

TheStreet.com Staff Reporter