Developers Offering a New Kind of Suite Deal with Condo-Hotels
The first near-Strip condo-hotels are scheduled to open in the first half of 2006, bringing a new hotel concept to Las Vegas.
The Platinum, being developed by Michael Peterson and Diversified Real Estate Concepts Inc., and the Residences at MGM Grand, a joint venture between Turnberry Associates and MGM Grand, are set to open during the second quarter.
“Las Vegas is moving into a new stage of real estate development,” said Rick Davis, a real estate attorney and co-chairman of the Hotel, Resort and Club Group for the law firm Greenberg Traurig.
The condo-hotel adds a new twist to the landscape. Las Vegas and its tourists have long been familiar with hotels, time shares and, most recently, condominiums.
People can purchase units in a condo-hotel and can use them at will, but also can opt to place the units in a rental pool that will rent out the units like a hotel when they are not in use by their owners.
Of the estimated 70-plus condo towers that have been announced for development in the Las Vegas Valley in the past 18 months, a handful are planned as condo-hotels, including the now-under-construction Trump International Hotel, which is expected to open in 2008 with 1,300 rooms.
Las Vegas was introduced to the condo-hotel concept when Vancouver, British Columbia-based Intrawest Corp. opened its own hotel-condominiums at MonteLago Village at Lake Las Vegas in September 2003.
The condo-hotel structure not only allows owners to realize appreciation on the real estate and take advantage of possible tax benefits, it offers developers an attractive business model.
Selling off the units offers developers an alternate source of financing and a way to get capital back, and offers lenders an exit strategy, Davis said.
“The economic model of this type of project does benefit a number of people. It’s become very popular, particularly on the developer side,” he said.
Michael Peterson, Owner of Diversified Real Estate Concepts, said there is a tremendous amount of demand for the condo-hotel product, not just in Las Vegas, but nationwide.
Peterson has developed several housing projects in Chicago and Wisconsin, owns several Houlihan’s franchise restaurants and has developed several condo-hotel and resort projects in Wisconsin.
His Las Vegas project, the Platinum, sold out in 39 days.
“I think there’s definitely an advantage to being the first project in the community (to open) because of the high demand in place and because we will be the first to deliver this type of product along with Turnberry,” Peterson said. The 255-suite, 17-story condo-hotel at 211 E. Flamingo Road, near Koval Lane, is expected to open in June. The property will be operated by Marcus Hotels.
“The idea of a condo-hotel gives people the opportunity to own a suite in a very desirable destination market, and Las Vegas is one of those markets. That’s why it sold out as quickly as it did,” said Bill Otto, Marcus Hotels President and Chief Executive.
Owning a piece of Las Vegas has been a big driver in the sale of units at the Residences at MGM Grand, a three-tower condominium- hotel complex on Koval behind the MGM Grand.
The first two towers, with 575 units each, are sold out. The third tower’s 575 units are about 75 percent sold out, said Dan Riordan, director of sales. Remaining units are priced at $600,000 to more than $2 million.
Turnberry expects to begin finalizing the sale of units in April and May; the closing period typically can take up to 60 days or more.
“Everybody has been pleasantly surprised. Typically it takes two years to sell a building,” Riordan said. “In two years we’ve sold almost three buildings.”
The condo-hotel concept has been around for about 30 years, popular mainly in beach-resort locations. In the past five to six years, the concept has caught on around the country as a viable real estate alternative. Low interest rates, a sagging stock market, overseas investors and baby boomers looking for second homes have all fueled condo-hotel development.
“The things that attract people to condominium-hotels is they are connected to hotels,” Riordan said. “Residential ownership with hotel services and amenities, which varies from one hotel to the next, that’s very appealing.”
Buyers in the Residences at MGM Grand will be able to use the amenities from MGM Grand. Residents will be able to access MGM’s features using an enclosed moving walkway that links each tower to the hotel and casino.
Peterson said the amenities, along with the location, are key to a successful condo-hotel project.
The Platinum will have indoor and outdoor pools, a fitness area, a 5,000-square-foot spa, restaurants and bars.
“You have to have a great site, a building that has an abundance of amenities and that is built and operated correctly,” Peterson said.
Condo-hotel units are also appealing because they usually come fully furnished. Units at the Platinum and the Residences will be furnished.
One reason condo-hotels are gaining popularity across the country is the option to put the unit in a rental pool. Often the income generated is enough to cover expenses, and no one should plan to “get rich” off their unit, experts said.
“It’s a chance to own along with the option to put it into a hotel rental program,” said Otto, whose company manages more than 3,600 rooms nationwide.
Like most hotel-condo properties, residents are not required to put their unit into the hotel rental pool at either the Platinum or the Residences.
Renters come from the same place guests of other types of hotels do — from rental pools, referrals and travel programs. How much an owner receives from renting out the unit also varies between properties.
“Restrictions on how long someone can stay at a condo-hotel differ from property to property. Some have no restrictions while others limit how often it can be used by the owner during the year.
Simply put, it’s best to think of a condo-hotel as a hotel first,” Peterson said. Riordan said most buyers at the Residences are buying units to enter them into MGM Grand’s rental pool, along with occasional use.
Peterson said the same goes for his property. “Most people buy in a place like this in Vegas because they want the rental income,” he said.
Contents copyright 2006 Las Vegas Sun, Inc.
By Liz Benston
December 11, 2003