News for the Hospitality Executive
|By Steve Brown, The Dallas Morning News
Knight Ridder/Tribune Business News
Nov. 28, 2003 - When residents at the Victory project condominiums get the late-night munchies, anything from a snack to a full meal will be a phone call away.
That's because the 80 condos are being planned on top of the W Dallas Victory Hotel and Residences to be built northwest of downtown.
And the project isn't unique.
A few blocks away, on Pearl Street, a combination Ritz-Carlton hotel and condominium building will soon begin advertising residential units.
Developers are selling the idea of combining hotels and condominiums all over the country – and it has as much to do with economics as providing extra service.
"A lot of developers are doing this today, and it makes sense," said Hillwood Capital president Jonas Woods. He said the company hopes to break ground in the next month or so on the W Hotel and Residences.
The tower – with 258 hotel rooms and 80 luxury condos – will be next to American Airlines Center.
Good for everyone Condo residents will get the kind of services found in a four-star hotel, including maid service, catered meals and use of the spa and concierge.
"The buyer of the condos is willing to pay a premium – in some cases as high as 50 percent over a comparable unit in the same market – because of the availability of hotel services," Mr. Woods said.
But more important, industry analysts say, is that the condominiums allow hotel developers to get financing and break ground at a time when hotel construction is at a virtual standstill.
"What the condos can do is take a marginal hotel project and make it feasible," said John Keeling, a hotel industry analyst for PKF Consulting. "It's very difficult to build full-service hotels.
"The profits from the condo can be used to increase the return on the hotel," Mr. Keeling said.
Hillwood is counting on that with its W Hotel project at Victory.
"Hotels require a lot of equity, and one way to get that equity down is to generate it from the condos, which you can presell," Mr. Woods said.
He said Hillwood has arranged its construction financing for the W Hotel and Residences and has hired general contractor McCarthy Building Cos.
"I think you're going to see this happening more and more in the higher-end, full-service hotels," Mr. Woods said.
Indeed, the next one for Dallas will be at the corner of Pearl Street and McKinney Avenue.
Crescent Real Estate Equities intends to announce its plans in the next few weeks for a Ritz-Carlton Hotel with condominiums to be built across the street from its namesake Crescent complex.
Company officials say they aren't ready to talk about the deal, but construction should begin on the marketing center for the project during the next couple of weeks, brokers familiar with the project say.
And Hotel ZaZa, which is a block away near McKinney and Leonard Street, has cleared a building site where it plans to build condos to join the 146-room hotel that opened last year.
First of its kind The first such project in Dallas – The Mansion Residences on Turtle Creek – opened in 1994 next to the Mansion on Turtle Creek restaurant and hotel.
Two adjoining condo buildings called the Plaza Turtle Creek also offer services from the Mansion hotel.
Dallas developer Craig Hall – who is currently investing in both hotel and condo projects – lives at the Plaza.
"We have service from the Mansion and thought we would use it more, but we've only done it once," Mr. Hall said. "But having the option is attractive to us.
"From a real estate standpoint, it definitely prices the condos a good bit higher," he said.
So Dallas residents will have several choices in the hotel-condo market.
The question remains, will they buy it?
"There are certainly buyers that would find the prestige of the hotels appealing," said Mike Puls, a local housing analyst with Foley & Puls. "It adds value to the unit.
"And if they can get room service and a massage, that's cool," he said.
But the concept probably won't appeal to every Uptown condo buyer, Mr. Puls said.
"Other people just want to go home and not be annoyed by the comings and goings in the hotel," he said.
Hotel analyst Mr. Keeling agrees.
"Typically these things have separate entrances," he said. "The condo owner doesn't want to mingle with the Lions Club conventioneers in the lobby."
As in most real estate projects, location is also crucial, Mr. Keeling said "If you are going to do it in a market that makes no sense for condos, it won't matter if it's on top of the hotel," he said.
So far, most of the hotel-condo projects nationwide have paired luxury hotels with pricey condos. But that may change, Mr. Keeling said.
"I think you will see these projects take a step down," he said. "There is some synergy from the two working together."
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(c) 2003, The Dallas Morning News. Distributed by Knight Ridder/Tribune Business News.