Even with rising demand, few new hotels -- particularly full-service ones with restaurants, bars and other amenities -- have been built because construction financing has been difficult to obtain, Ford said. In the two highest lodging segments, 45 hotels were under construction as of December, compared with 130 at the end of 2007, according to STR.
"It's still hard to finance a pure hotel play," Ford said. In big cities, "it's just very expensive to build. So until the hotel is completed and returns money, you can sell condos and finance the hospitality component. The hotel component in turn will provide you with long-term cash flow."
Condo developments with a hotel can be structured in several ways. In some cases, residences may be connected to the lodging segment only so that owners can take advantage of the hotel's amenities and benefit from the brand's prestige. That tends to put a premium on unit prices.
In other developments, known as condo-hotels, a portion of the condos are made available to the hotel when owners aren't using them, producing revenue for residents.
During the last recession, some buyers of condo-hotel projects incorrectly assumed unlimited property-value appreciation and lodging demand that would supply lucrative returns. During the financial-market meltdown, many projects faltered, said Jim Butler, chairman of the global hospitality group at Los Angeles-based law firm Jeffer Mangels Butler & Mitchell.
Casualties included SB Hotel Associates' Trump International Hotel & Tower in Fort Lauderdale, Florida. The project stalled, and some residential buyers sued after Donald Trump pulled out in 2009. In Chicago, the Shangri-La hotel-condo development came to a halt in 2008 after reaching the 28th floor, and the property's skeleton was unfinished until New York-based Related Cos. resumed construction in 2012.
"Residential and hotel are two very different and separate businesses," said Neil Shah, president of Hersha Hospitality Trust, a real estate investment trust that owns hotels including the Rittenhouse in Philadelphia. "The differences require extra caution and expertise. In great times you can leverage them together, but the risk is not just financial but also operationally very significant."
While financing of condo purchases in hotel projects may be less risky than during the last housing boom, other risks remain, including the potential for overbuilding, according to Butler, the hospitality attorney.
"Developers will build whenever they can," he said. "If construction financing comes in within months, there will be an explosion of new projects. That is what we've done for 100 years. The only discipline to be had is from the financing side. Developers won't show any restraint."
In Miami, Related Group of Florida has four projects under way that include a condo-hotel component, which will make some of the units available for hotel use when vacant. Much of the buyer demand is coming from South American investors, according to CEO Jorge Perez.
Perez, who had to restructure more than $1.5 billion in debt on mostly vacant Florida condos in 2010, is looking to protect himself from potential future downturns by requiring at least 50 percent equity from buyers.
The $150 million Beachwalk hotel-residential project in Hallandale Beach, Florida, which Perez expects to be completed in 2015, has 300 residential units. Eighty-four of them are purely for condo use, and the rest will be made available to the hotel when residents aren't occupying them. The units sold out in two months, with an average price of $500,000, according to Perez.
"The money that is coming in from buyers from Latin America and Europe is unprecedented today," he said in a telephone interview. "When we talked to some of these potential buyers, a lot of them said they were investors. But they also wanted to be able to enjoy their condos and at the same time maximize their income. That's why we are creating a hybrid product."
Viete, the Venezuelan buyer at the Hyde Resort -- a Related development with Miami-based Fortune International Group -- said the ease of renting out his condo was another reason he was attracted to the project. He also liked the property's Hyde brand, by luxury entertainment company SBE.
"With that kind of name on top of a great project, you will have many interested people in the future if you want to sell," he said.
That type of thinking is what makes condo and hotel properties so attractive for real estate investors, LeFrak said.
"If there is a high-end hotel brand associated with the condos, then people's expectations about the quality of service and reliability are elevated," he said. "The brand has some clout. And that in turn creates a premium and additional value for the developer."
_ With assistance from Brian Louis in Chicago.
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