The shift from condo to condo-tel marks yet another level of capitulation in the Miami condo market. One of the buildings that I’ve seen, Opera Tower, is held by a very strong developer, and longtime landlord named Tibor Hollow. The other one on Hotels.com is called The Club at Brickell Bay and is a true fractured condominium. Once a condo is converted from residential condo to residential condo-hotel, the prospects for a developer selling end units are pretty dim in the short term. In the case of the fractured condo, if there’s anybody left who bought in cash, it says that the units’ fair market value has hit the liquidation price, since the banks don’t even care to sell them anymore and since the whole building has gone from Prince to Toad, the best way to deal with it is as a pooled rental building with individual owners.
Once a residential condominium becomes a hotel condominium, the financing equations are completely altered, and it becomes nearly impossible (in this market) to sell any product with financing. Some of the failed condos in downtown Miami are openly marketing themselves as Hotels (as in on Hotels.com) without any fanfare accompanying this. It marks a dramatic shift in the market, one that I have been predicting. There were so many hotels knocked down in Miami’s central districts to make room for condo developments that there has been a major shortage in affordable rooms in these areas. The average hotel room rate in South Beach rose above the price of Manhattan in the last couple of years. Now, you can rent in a condo-tel in downtown, full kitchen, and all, for $120-160 a night.
At the moment, there’s almost zero financing for condominium hotels in the national or even in the local Miami market, where there are both residential condo-hotels (which are not flagged, units with full kitchens and suitable for year round living) and commercial condo-hotels which are essentially hotel rooms 600 sq. ft. or less that are sold to individual investors. The condo-tel property type has been considered fairly unique nationally, and I wouldn’t call them common here. It’s maybe about 10%-15% of the total condominium market in South Florida and less statewide.
From what I am reading in the reviews, the Condo-tel units that are being converted are not offering much in the way of room services, hotel packages (such as cleaning materials, coffee, etc) and would be more suited to medium term renters who are planning a 5-10 days stay.There are many other condominium hotels in the downtown Miami area, but they are “flagged” which is to say, operated by a national or international hotel chain and up to their service standards.They are not to be confused with these new condo-tels, then again, they are bound to be . . .
