Slow Demand Shelves Planned Miami-Dade County Condo Conversion
A weak South Florida real estate market may prove a boon to rum rummers in Islamorada, the Miami Herald noted yesterday.
The owners of Holiday Isle announced Monday they were scrapping plans to finance a new luxury resort there with condo sales and will seek a traditional commercial mortgage loan to build the project instead.
The decision complicates plans for upgrading the famously honky-tonk getaway, which claims to have invented the frozen rum concoction.
It also reflects South Florida housing market’s growing disillusionment with the condo-hotels (or condotels) in which individuals own the rooms and share in the rental revenues.
Starwood Hotels and Resorts last summer dropped plans to sell all 230 rooms of a planned St. Regis Bal Harbour as condotel units. Instead, Starwood and its partner, Related Group, plan to sell off fewer than 40 and will keep the rest as hotel rooms.
Robert Falor, once South Florida’s most prolific condo converter, said he has dropped plans to convert the South Beach Royal Palm, Breakwater and Edison hotels in the face of a slow Miami real estate market that helped push the Breakwater and Edison projects into bankruptcy.
“The market for the condo-hotel has just gone sideways,” Gregory Rumpel, Executive V.P. of the Jones Lang LaSalle hotel brokerage in Coral Gables, said.
With Florida mortgage demand slow - sales of Miami condos dropped 44 percent in February from a year ago - and room rates hitting record highs, Rumpel said hotels are looking more lucrative than condominiums for some real estate developers.
The trend may reassure Miami-Dade County condo-hotel skeptics, who warned the conversions would displace tourists and conventioneers. But condotel sales are still financing luxury hotels throughout the region, including two W resorts.
“I’m seeing that product being strengthened a little bit from all the bad press that condominiums are getting,” said Alicia Cervera, the broker overseeing condo-hotel sales at the South Beach W and the St. Regis Bal Harbour.
Buyers are “thinking maybe now isn’t the time to buy a Florida condo. So maybe now is a time to buy a Florida condo-hotel.”
Adam Schlesinger, whose company paid $98 million for the 151-room Holiday Isle in February, said weak sales forced him to switch gears after only two months, despite a lavish launch that included glossy full-page newspaper supplements for the planned Ocanos resort.
“It is simply a victim of a skeptical housing market,” Schlesinger said in a statement released Monday. He added condo-hotel sales could resume if the real estate picture improves.
Schlesinger said dropping the condo-hotel plan has caused some delay, but that he still needs local approvals before scheduling a demolition date.
He expects Florida mortgage loan demand to pick up and the project to come to a close next year at the earliest and possibly not until 2009.
SOURCE: Miami Herald
