LOS ANGELES—“The most successful mixed-use projects that made it through the downturn were properties that have a balance,” said Timothy J. Grisius, SVP of lodging and mixed-use development at Marriott International. “If the project is contingent on the condos, then you have a problem during a downturn.” At ALIS 2015, Grisius sat on a panel with Rob McIver, principal and CFO at the Athens Group, and panel moderator Clifford Risman, a partner at Gardere, discussing the ins and outs of mixed-use development.

McIver agreed, adding that each component also needs to stand on its own, and not be overleveraged. Because of the mistakes made during the downturn, a lot of projects that are breaking ground today are a lot more balanced than in 2006-2007. Speaking more broadly about success of mixed-use projects, he said, “The structures need to start with a good partnership to create a destination that works. There is a lot of give and take through the development process and natural friction among different parties, so ultimately, having a strong, shared vision at the start of the project is essential.”

Since the downturn, both McIver and Grisius agreed that the new trend is really just returning to fundamentals, and making sure that the projects are properly financed.  “There aren't a lot of new and creative ideas,” said McIver. “It is more a return to basics.” While Grisius added, “We are also revisiting the programs that people used in the past and that were successful. I don't think there is one business model that works. It really depends on the location, and what works for the location.”

For luxury hotels, there has to be a residential component; however, a hotel with residential space and a mixed-use project with hotel and condos is not the same type of project, and, according to the panelists, a lot of lenders have difficulty distinguishing between the two. “We have been doing a good job lately defining those as an industry.” Ultimately, said Grisius, “The most successful hotels are those that cater to locals too.”

ALIS 2015 was in Downtown Los Angeles this week. The event also included discussions about how technology is changing and shaping the hotel industry.