(Carl Cronan is editor of Real EstateFlorida.)
David Schwartz doesn't like bad press, especially when it's about the hotel-condo industry, which he claims his family pioneered during the earliest days of Miami's famed South Beach development. His grandfather sold ownership in hotel rooms there, and his own involvement in the business goes back 30 years when he moved from Chicago to Miami to develop the city's first condo-hotel, the Jockey Club.
"People have always been enamored with the idea of living in, and owning, part of a hotel," says Schwartz, managing principal of the Management Consortium Inc., a hospitality advisory services firm based in Hollywood, FL. He adds that the concept is even more compelling given the unprecedented wealth and disposable income of baby boomers now approaching retirement age.
So naturally, Schwartz gets annoyed when he sees headlines such as the one appearing recently in the Wall Street Journal, over an article about condo-hotel investment: "Rooms with a Bubble View." The first paragraph of the story compared declining unit values to the plummeting stock price of Pets.com in 2000.
Admittedly, Schwartz says there have been plenty of condo-hotel buyers who anticipated substantial returns on their investment, along with real estate agents who sold units on the basis of those expectations. Yet he and other marketers of these types of developments argue that there are plenty of owners who intend to keep their units as a second home in Florida that they might not afford as easily as a full-time residence.
For example, Floridays Resort along Orlando's International Drive is changing its marketing strategy from selling units to domestic owners—including several local residents who bought units purely as investments—to international visitors who actually want to stay there during visits to the Sunshine State.
"Our marketing has taken us primarily out of the country," says Neil Scott, vice president in charge of Floridays' sales center. The $125-million development has sold all 432 units in its initial development phase and is now selling a 360-unit Phase II that will include its own water park.
Floridays units, a third of which Scott says have landed buyers from the United Kingdom, are priced more advantageously than other condo-hotel developments within Orlando's theme-park empire. Two-bedroom, two-bath units are offered at $370,000, which he says reflects the cheaper land Floridays' developers were able to secure by starting the project three years ago.
"We've been fortunate because our price points are better," says Scott, whose resort is across International Drive from a much-higher-priced development called Villa Milano. A large sign with an image of an attractive woman in a bikini top lounging in a pool marks the site, but the telephone number and Web address listed are no longer in service.Schwartz, who also serves on Real Estate Florida's editorial advisory board, says many seasoned and honest developers follow the letter of the law in selling condo-hotel units. He specifies that condo-hotels are intended to be sold as a lifestyle choice, rather than an investment vehicle.
"Investment is a dirty word in our business and will only bring you trouble—both in the form of angry investors, their angry lawyers and the Securities and Exchange Commission, which is waiting to make examples of unscrupulous developers and their sales agents who look for the greed and turn it into a sale," Schwartz says. He notes that any of his firm's agents who are found to be talking with prospective buyers about investment are subject to immediate termination.
Despite the negative publicity surrounding condo-hotel sales lately, similar to what timeshares faced two decades ago, Schwartz says he remains a "true believer" in such developments. He points out that his family has been involved in condo-hotel development longer than anyone else in the business, and he's not about to change plans now.
"We have many successful projects and happy buyers who are enjoying a four- and five-star lifestyle," he says. "Like the timeshare business that suffered many travesties and unscrupulous sales tactics in the '80s and has evolved to being the fastest-growing segment of the hospitality business, so will condo-hotels and resorts in the 21st century."
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