Second record-breaking profit year in a row

Lodging Econometrics, a hotel real estate forecasting firm, estimates 917 hotels with 100,559 guest rooms will open in 2007 nationwide, the highest total for new openings since 2001, but far removed from the peak set in 1998 when 1,532 hotels with 156,471 rooms opened.

Because the supply increase forecasted for 2007 is modest - just 16,101 more rooms than 2006 - and because the industry has already seen 26 consecutive months of improved demand, which is expected to continue well into the expansionary phase of the present cycle, 2007 is on track to become the second record-breaking profit year in a row.

It's expected to exceed the record $26 billion anticipated for 2006, said Patrick Ford, president of Lodging Econometrics in Portsmouth, N.H.

"We're still too early in the cycle. In many markets, the economic recovery has not been broad enough to produce sufficient job growth, so business travel, although improving, has not as yet fully recovered or pricing power completely returned," he said.

Lodging Econometrics estimates that by the end of 2005, between 10 and 12 markets of the top 25 will still not have fully recovered to pre-9/11 operating levels. That indicates that there is still room for additional industry profitability growth toward the back end of the decade.

The majority of planned-construction growth is scheduled to take place at highway locations, in smaller cities and in the outer suburbs of larger cities, mostly in the upscale, midscale and economy segments.

The leading upscale brands are Marriott's Courtyard, Residence Inn and SpringHill Suites with a combined 50 percent construction pipeline share within the chain scale, and Hilton's Garden Inn and Homewood Suites with a 33 percent share.

Holiday Inn Express, with a 29 percent share, and Hampton Inn and Suites, with 22 percent, are the fastest-growing brands, along with Comfort Inn and Suites in the midscale segment, while Microtel, with a 46 percent share, is the economy leader.

Supply shrinking in some markets

Some 58,240 new guest rooms were added in 2004, resulting in a 1 percent net supply increase. Although 70,646 rooms will be added this year, early indications are that net new supply growth will actually finish below 1 percent this year.

"Despite a modest flow of new hotel openings, 11 of the top 25 markets actually show negative supply growth through the first half of 2005, up from six markets in 2004. The reason is that a significant number of guest rooms are going 'off market.' In many markets, hotels are temporarily closed because they are being reflagged and are undergoing extensive renovation programs. In the Southeast, it's because of damage incurred during last year's hurricane season," ford said.

Several functionally obsolete properties from the 1950s and 1960s, particularly in resort communities and in many smaller markets , are being forced to close by a newer generation of products in the midscale and economy segments that are more contemporary and have greater consumer appeal.

In larger tourist destinations, like Anaheim, Calif., Orlando, Fla., Phoenix and Hawaii, along with the Florida and California coasts, and at golf and ski destinations, old properties with prime locations are sometimes being demolished for new hotel construction, but more often than not, for condominium projects that will serve as primary or secondary residences.

In urban centers - financial and technology centers are the best examples - in such cities as Washington, D.C., New York, Boston, Miami, San Francisco and Los Angeles, some hotels are converting a portion of their guestrooms into residences.

"Across the country, there are 28 existing hotels known to be joining the 'condo-hotel' bandwagon. Seventeen are converting a percentage of their guest rooms into residences, while another 11 are completely converting to condo hotels, selling their entire guest room inventory as individual condominium investments," Ford said.

"In the new construction pipeline, 101 hotel projects are planning to include a residential component. Another 46 will be pure condo hotel projects, selling their guest room units as individual condominium investments."

Adding a residential component to a new high-end, full-service hotel project, or planning to sell the completed guest rooms as individual condominium investments is one way large hotels can be built this early in the development cycle. The early sales proceeds provide comfort to both the developer and the lender; enabling the project to carry less long-term debt and improving the project's overall feasibility.

"These are classic examples of where all types of real estate migrate to their highest and best use to provide the highest and best return on invested capital. In some cases, that means residential and condominium development as a replacement for, or an enhancement to, hotel development," he said.

In several markets, the first wave of new supply additions in this new upcycle will go to replace "vanishing" inventory before contributing to any positive net new supply growth. This overall refreshing of the industry's inventory is good news for investors, operators and consumers alike.

Leading hotel companies in 50 largest markets

Because it's the strategic planning season, Lodging Econometrics separately studied all hotel construction and reflagging project records for the leading companies that have an array of brands across the various chain scales in the 50 largest cities.

These markets are important because they are the top economic and leisure destinations in the country and therefore are the top targets for brand distribution and marketplace presence.

The study revealed:

+ Marriott has the most projects and gues trooms in the development pipeline in these markets with 189 projects of 31,335 rooms. Hilton is second at 183 projects of 26,682 rooms. Marriott has the dominant development position in 19 of the 50 markets; Hilton leads in 16 of the markets, while Starwood follows in nine.

+ Marriott has the most open and operating hotels with 1,310 hotels of 263,272 rooms, followed by Hilton with 1,125 hotels of 224,126 rooms. Marriott has the most hotels in 31 of the 50 markets, Hilton in 14 and InterContinental in two.

"It's a neck and neck battle for market share between the two giants, Marriott and Hilton," said Ford, "but the development pipeline indicates that Marriott is likely to retain its overall lead in the nation's largest markets, at least through the end of the decade." s

A Miami healthy living community being built by WSG Development Co. received a $386 million construction loan from Hypo Real Estate Capital Corp. yesterday, taking the oceanfront development one step closer to its late-2006 opening date.

Canyon Ranch Living - Miami Beach is a six-acre residential community with a 150-room hotel anchoring two condominium towers. Priced between $1.2 million and $9 million, the one-, two- and three-bedroom condos are nearly 100 percent sold. Sales of the oceanfront property have surpassed $500 million, according to Miami-based WSG Development.

WSG, which couldn't be reached for comment, said in a statement that Canyon Ranch Living is the first community of its kind, dedicated to providing health and wellness facilities for residents. Although there are other Canyon Ranch properties in Arizona, Las Vegas and Florida, the Miami Beach facility is the eponymous spa company's first residential venture.

Condo hotels have quietly become one of the hottest areas of the real estate market.

The condo hotel concept provides benefits for the developer as well as for the buyer. Developers find it easier to obtain financing with condo hotels than with traditional hotel projects, plus the cash infusion of the sales helps their bottom line.

Buyers benefit by owning a property in a luxury resort that they can use for themselves, and take advantage of the high level amenities.

When they are not using the condo hotel, the unit is put in the managed pool and rented out for them. The buyers have what is considered "hassle free" ownership.

The condo hotel unit owners also benefit from having a professional onsite management company to handle to marketing, booking of their room and general expertise that they bring to the table. If a problem should arise with their condo hotel unit, the management company will take care of it instead of the owner having to worry about it. This makes the traditional landlord tenant issues a thing of the past.

The condo hotel buyer sees the benefit to owning a vacation property that also has the potential to produce income for them. The typical condo hotel produces higher levels of income than the traditional vacation home (and less headaches), making it all the more appealing to buyers.

Developers are finding it hard to keep up with the demand. Many of the condo hotels are selling out before ground breaking occurs. Condo hotels are different from traditional condos because the are sold "turn key". This means buyers do not have to worry about hiring a designer or contactor to come in to finish out the unit. Everything is included from linens, dishes, pillows etc�

The South Florida condo hotel market is leading the way with many of the names you know such as the Four Seasons, Starwood, Sonesta, Ritz Carlton and the Regent to name a few. Pricing for condo hotels can range anywhere from $400,000�s up to $8 million for larger luxurious oceanfront properties. Of course the pricing depends on location, views and types of finishes.

The Cheeca Lodge in Islamorada (Florida Keys) has enjoyed great success for its clientele. The Cheeca Lodge is currently converting rooms in the existing hotel but has plans to add more to the property. The property sits on 27 lush acres and has 203 guest rooms, including 48 suites that all have full kitchens. In addition, Cheeca Lodge offers an extensive range of services and amenities.

The W Hotel and Residences South Beach will soon be ready to launch. The W is one of the hottest names in the hotel industry. The development team for the W Hotel and Residences South Beach combines some big names in the field � Tri Star Capital, Related Urban Development (The Related Group of New York and The Related Group of Florida) and Starwood Properties. Expect a Wow lobby spectacular interior design and some ultra deluxe hotel rooms designed by Costas Kondylis of Kondylis & Partners. All units are sold completely finished and furnished � right down to the table settings; price range, $800,000 to $5 million.

Starwood and the Related Group of Florida have announced that they are joining forces to develop the St. Regis Resort & Residences in South Florida's most exclusive enclave, Bal Harbour. The St. Regis Resort & Residences will be built on the existing site of the Sheraton Bal Harbour, will be located on the pristine sands of the Atlantic Ocean directly across the street from the legendary Bal Harbour Shops. The St. Regis Resort and Residences is one of the most highly anticipated project to ever hit the South Florida market.

Canyon Ranch Living is the next step for Canyon Ranch's evolution and will be located on a 6 acre oceanfront parcel in Miami Beach. Canyon Ranch Living will offer 151 condo-hotel suites and 467 one, two and three bedroom and penthouse condominium residences, plus a 60,000 square-foot Spa & Fitness Center.

Turnberry Associates is bringing the Fontainebleau to a whole new level with the addition of the Fontainebleau II and Fontainebleau III Ocean Club.

Turnberry is leading the way with condo hotels anchored to existing very successful hotels such as the Residences at MGM Grand Las Vegas, and the Residences at Atlantis Paradise Island Nassau Bahamas.

The Residences at MGM Grand Las Vegas broke ground recently on its first 40-story tower, spearheading a wave of condominium-hotel growth that has begun to sweep the Las Vegas Valley. The Residences at Atlantis is a joint venture between Turnberry and Kerzner International that will bring 500 luxurious new rooms to the project.

With so many condo hotel projects on the market or in the planning phase, you need someone who can find the one that is right for you. The new condo hotel section at www.HansenHomesAventura.com can help keep you on top of the latest projects so you can be one of the first to buy. (PRWEB)

Officials at Sonesta Beach Resort on Key Biscayne announced plans Tuesday to convert the facility to a condo hotel with expectations of netting $650 million on sales of the units.
Fortune International is to market the development.
The existing property, built in 1969, will remain open until 2006 while the project is planned. The resort will close during a two-year construction.
Sonesta has sister properties on Sunny Isles Beach and in Coconut Grove.
The project will allow Boston-based Sonesta International Hotels Corp. an opportunity to double the size of rooms and upgrade to five-star quality, said Roger Sonnabend, the company's executive chairman.
"The rooms are 1960s sizes. They are 330 square feet, and we intend to build rooms of 500 to 600 square feet," he said. "Also, Miami could use an additional first-class hotel."
Neighboring Ritz-Carlton, Key Biscayne, Four Seasons Hotel and the region's only five-star hotel, Mandarin Oriental Miami, are obvious rivals, he said, though the Brickell and Brickell Key properties don't qualify as resorts.
"We're determined to at least equal if not better them," he said. "There is a shortage of truly luxurious hotels, and Key Biscayne lends itself to that quality. Other cities boast a number of five-star hotels, Miami doesn't."
That would be achieved, Mr. Sonnabend said, by offering better service.
"Training of personnel will be even more important. In a five-star property, more service is expected, more service on the beach."
Consumers weren't necessarily becoming more demanding, he said. Rather, others were looking at saving money.
"It goes both ways," Mr. Sonnabend said. "There's also tremendous demand for less expensive hotels with less service - a growth in the budget market."
The 10.5-acre site could accommodate a 930,000-square-foot facility, he said, with 200,000 square feet of public space and 700,000 square feet in guest rooms.
Mr. Sonnabend declined to reveal construction costs, though Fortune is to pay Sonesta $30 million in cash and discharge a mortgage of the same value as part of the transaction. Sonesta is to transfer the four-diamond AAA site to Fortune for $60 million and enter into a 50-50 partnership in the deal, set to close by mid-April.

From Boston to Los Angeles, developers are busy converting existing hotels to one of the hottest concepts in the lodging and real estate industries today � condominium hotels. In many cases, developers are working with branded hotel companies to build mixed-use luxury properties in city centers and resort markets. These complexes typically include a hotel, residential units, office space and retail stores.

So, why have condo hotels become so hot? For starters, developers can sell off hotel units prior to construction, enabling them to obtain construction debt and equity more easily than if they were building a traditional hotel.

Additionally, the inclusion of attractive condos within hotels can typically garner a higher sales price per square foot, allowing developers to generate cash flow to cycle back into the facility or new projects, according to Regent Street Advisors, an affiliate of The Plasencia Group, a hospitality consulting firm and financial advisor.

During the past few years, while the hotel industry was in the midst of a cyclical downturn, condo hotels have been an attractive way for developers to get deals done. In fact, many luxury hotels would not have been built without a residential component, says Dan Peek, managing director at Regent Street.

Lenders are more willing to finance condo hotels with only 20% equity because they are banking on projected condo sales prior to construction. Traditional loans require about 30% to 40% equity, says Peek. �Assuming sales happen as projected, the loan is guaranteed by condo purchases.�

Additionally, partnering with luxury and boutique brands can help turn up the heat even more on this already hot segment. So, it's no surprise that developers are turning to upscale brands like Four Seasons as well as Marriott's Ritz-Carlton, and Starwood's St. Regis and W hotels. Even some other luxury brands, which haven't traditionally offered a mixed-use residential component, are entering the playing field, including Hyatt's Grand Hyatt, Mandarin Oriental, and Hilton's Conrad.

�Let's not ignore what drives corporate development � profit,� says Jim Alderman, senior vice president of development at Starwood Hotel & Resorts Worldwide.

World-class example

In Manhattan, The Related Cos. and Apollo Real Estate Advisors developed the new Time Warner Center, which opened to great fanfare in 2004. The center includes The Mandarin Oriental luxury hotel, as well as The Residences at the Mandarin Oriental � luxury condos ranging from 540 sq. ft. to 8,400 sq. ft.

The complex also encompasses Time Warner World Headquarters, The Shops at Columbus Circle, One Central Park condominiums, 211,000 sq. ft. of Class-A office space, Jazz at Lincoln Center, and 504 parking spaces.

�There's no question about it: The Mandarin Oriental name is a great selling tool. There's a certain �buzz� about becoming a permanent guest here,� says Susan de Franca, president of residential sales at Related Cos.

Related and Apollo own 50% of the 251-unit luxury hotel, while Mandarin Oriental owns the other 50%. The hotel's 65 residential apartments, located on floors 64-80, have sold at prices ranging from $2.5 million to $30 million. Unlike some other condo hotel projects, where the condos are rented out as hotel suites when not in use, the residences at Mandarin Oriental are used only by owners and their guests, says de Franca. �This was a decision we made with Mandarin � to ensure exclusivity for owners.�

Mandarin Oriental owners were willing to pay higher prices to buy luxury apartments at the upscale hotel complex, where they have access to all the hotel services and amenities. �Certainly the price per square foot is higher than the building next to us, but our residents have access to our pool and fitness center, plus they get priority treatment at our restaurant and spa,� says Kristin Ruble, director of sales and marketing at The Mandarin Oriental.

Flurry of new projects

With the success of the Mandarin Oriental in New York and the high demand for serviced hotel apartments in urban markets nationwide, the hotel company has teamed up with CWB Boylston to open a similar property in Boston in September 2007.

CWB Boylston is building a 150-room Mandarin Oriental hotel, 50 ultra-luxury residences, 35 rental apartments, retail shops and restaurants in the heart of Boston's Back Bay. Almost all of the residences have been sold � sans advertising or marketing � for $2 million to almost $10 million, says CWB Partner Robin Brown.

Developer Espirito Santo Group also is realizing success with the branded mixed-use model. It partnered with Hilton's luxury Conrad brand to open the first newly built Conrad hotel in the U.S. last year in Miami. The Conrad Miami is part of the Espirito Santo Plaza and includes 203 rooms, 116 residences and 11 penthouse suites. Since the complex opened, the Conrad name has helped drive condo sales, as well as generate business from office tenants in the complex. Many tenants have rented meeting space in the hotel, and some of the executives have even bought condos at the Conrad.

�This is truly a project where everyone benefits. The synergy works,� says Bill Ross, president of Estoril Inc., which is working with Espirito Santo to sell condos and lease office space. Some 93% of the complex's 300,000 sq. ft. of office space is leased out, making Espirito Santo Plaza one of the fastest lease-ups in Miami history, says Ross.

» Continue reading "Why Condo Hotels Are a Hot Concept"

With lenders today having virtually no appetite for large-scale resorts or convention hotels, developers in search of financing for high-end product are faced with two alternatives � trim the size of their projects significantly, or add condominiums to their plans.

Why are condos so attractive to hotel lenders? For starters, proceeds from the sale of the units can be used to pay off part of the construction loan. And because condo units supply a revenue stream before the property even opens, lenders are willing to provide a 75% loan-to-value for condo-hotels compared with a 60% loan-to-value for a traditional hotel project, explains Frank Nardozza, chairman of REH Capital Partners, a Fort Lauderdale, Fla.-based hotel investment company.

�There's hardly any other way to get a major new-build project financed today,� Nardozza emphasizes.

Condo-hotels also produce higher returns for investors. Leveraged returns for a condo-hotel can exceed 30%, says Nardozza, while leveraged returns for a standard hotel range between 15% and 25%. Still, the complications involved in developing condos � including the need to set up pre-sale offices and form neighborhood associations to represent the individual owners � discourage some companies from going that route.

Top 5 Hotel Markets � Number of Rooms* Existing Supply Recently Opened** Under Construction
1. Orlando 115,075 2,209 5,009
2. Chicago 99,553 1,699 2,14
3. Los Angeles 97,293 706 749
4. Atlanta 90,312 792 2,475
5. Washington, D.C. 87,685 1,172 3,175
*As of July 2003
**Recently opened: Hotels that opened in past 12 months.
Source: Smith Travel Research/PPR/FW Dodge

Revenue from condo sales is used to finance the property, so condos become part of the project's equity, explains Ted Darnall, president of the real estate group at White Plains, N.Y.-based Starwood Hotels and Resorts Worldwide Inc. (NYSE: HOT). �Even though the pure, traditional hotel economics aren't necessarily supporting the level of growth that we've seen in the past in our industry, there are new economics created by these [condominium] projects,� emphasizes Darnall. �It's a means of finding equity that you couldn't find in other environments. It's a very good, successful model.�

As a result, Starwood has revamped its growth strategy by including condos in the mix. The company, an owner and franchiser of luxury hotels, previously specialized in destination resorts such as the $180 million, 735-room Westin Kierland Resort & Spa in Phoenix, which opened in November 2002. However, in late July Starwood unveiled plans for two W hotels � the company's trendy, boutique-style brand � that were designed to appeal to today's skeptical lenders.

Although the W Dallas Victory Hotel and Residences and the W Fort Lauderdale Hotel and Residences will feature less than half of the hotel rooms of the Kierland resort, they will be the first W properties to offer condo units. The hotels are scheduled to open in late 2005 and December 2006 respectively. The Fort Lauderdale property, which will be owned by Capris Resorts LLC, will contain 346 hotel rooms and 171 condo units, while the Dallas property, featuring 251 hotel rooms and 94 condos, will be owned by Gatehouse Capital Corp., Hillwood Development Co. and Southwest Sports Realty. Starwood will manage the properties.

The Economy's Influence

The condo-hotel trend picked up steam about three years ago when New York-based Millennium Partners developed several Ritz-Carlton and Four Seasons projects in markets such as Boston, San Francisco and New York.

Starwood's new strategy of including an ownership-unit ingredient in its projects is part of the plan for the Aladdin Resort in Las Vegas. In August, Starwood partnered with investors from Orlando-based Planet Hollywood and offered $635 million for the casino, which went bankrupt in September 2001. The team plans to convert 600 units into timeshares. In early September, the offer was under review in U.S. Bankruptcy Court.

There's good reason for hotel lenders to be skittish. The industry has yet to post consistent revenue gains since the Sept. 11, 2001, terrorist attacks. The total revenue per available room (RevPAR) nationwide dropped from $41,335 in 2000 to $35,753 in 2002, a 13% decline, according to the Hotel Research Group, a division of San Francisco-based PKF Consulting.

The three-year slump in hotel revenues also has taken its toll on overall development activity. As of July, the total number of hotels in the construction pipeline dropped 27.4% compared with July 2002, according to Henderson, Tenn.-based Smith Travel Research.

The number of upper upscale hotels under construction fell to 44 in July of this year compared with 70 in July 2002, according to Smith Travel Research. The Smith Travel upper upscale category is a wide grouping of chains ranging from Sheraton to Four Seasons, which the hotel companies themselves more commonly label as upscale and luxury hotels, respectively.

Although construction is on the wane in most markets, the exception to the rule is Orlando. As of July, there were 5,009 hotel rooms under construction in metropolitan Orlando, up from 2,838 rooms in July 2002, according to Smith Travel Research (See sidebar on page 42).

�Financing has been very hard to come by over the last couple years for most companies,� says Scott Johnson, vice president of development at Omni Hotels, which holds an ownership interest in most of its hotels. The Irving, Texas-based company has three projects under construction, including the 511-room, $124 million Omni San Diego scheduled to open in spring 2004.

But Omni Hotels has yet to announce a new project this year. The company, which also purchases properties for conversion to the Omni brand, has not been able to find a property to buy this year because sellers are expecting higher prices than their properties are worth in the current operating environment, says Johnson.

In another signal that these aren't the best times for developing large-scale luxury hotels, Ritz-Carlton has cut back its development plans in the U.S. after opening properties at a torrid pace in the past few years. The luxury hotel company, a division of Bethesda, Md.-based Marriott International Inc., has opened five hotels in the U.S. in the past 12 months, but now only has one project under construction and one other project in the pre-planning stages.

Although there are several U.S. markets the company considers candidates for Ritz-Carlton properties, including San Diego, Seattle, Dallas and Beverly Hills, Calif., the company wants to focus on managing the properties it has recently opened before embarking on more U.S. projects.

�We have defined our goals for the next five years, and most of those plans involve new hotels in Europe, the Middle East and Asia, rather than North America,� says Simon Cooper, president of Ritz-Carlton.

Thinking Small

With lenders wary of committing to large-scale resorts, some hotel companies are concentrating on expanding their portfolios by developing smaller hotels. They're also venturing into unglamorous secondary markets where there is more room for new supply. Starwood is developing a 150-room to 250-room prototype for its Westin and Sheraton brands geared toward secondary and tertiary markets. Hilton, meanwhile, is gearing up for an expansion of its Conrad brand, which is a boutique-style luxury hotel.

Starwood estimates that there are 20 Sheraton hotels and 15 Westin hotels in various stages of development modeled after the company's new prototype. The scaled-back hotels, which offer many of the same amenities as the larger Sheraton and Westin properties, are part of a strategy to grow market share against its two main rivals, Marriott and Hilton.

�We think there's a solid opportunity for growth there,� says Darnall. �We're happy with the construction pipeline for the Sheraton and Westin prototypes.� The company plans to own about 10% of the prototype properties and franchise the rest.

» Continue reading "Condos Help Seal Hotel Financing Deals"

Buyers from Europe, Latin America and the U.S. Northeast target city

MIAMI - They have thought-provoking names like Opera, Axis and The Venture, condominiums that will line Miami�s bayfront skyline.

These high-rises are part of a condo crush spawned by the nation�s housing boom and buoyed by active investors from Europe, Latin America and the U.S. Northeast that target the city because of its worldly feel and relative affordability.

�When you look around the world and you consider the factors of the environment, climate, amenities, risk and appreciation, Miami Real Estate ranks way high up there,� said Jorge Perez, chairman of The Related Group of Florida. The Miami-based developer plans to build more than 15,000 units in South Florida and Las Vegas in the next four years � with buyers already lined up for many of them

From Florida to California, condos are a growing housing option for people who have been priced out of the single-family home market or are seeking a more upscale, all-in-one lifestyle for a second home. They are also a growing market for speculators � many from abroad � looking for units to resell, or �flip,� to take advantage of low interest rates, cheap dollars and attractive supply and demand.

But prices are rising, community activists are railing against development, and observers are wary of a possible bust because of speculation fueled by investors in the pre-construction and condo-conversion markets. Perez and others say they don�t anticipate a collapse, but instead are preparing for a price correction that would level out the sales prices for condos.

According to the National Association of Realtors� statistics, 960,000 condos sold this year as of June, 12.4 percent more than all of 2004 and up 46.1 percent from all of 2002. The average condo price was $223,500 in June, up 14.8 percent from last year and 57.1 percent from three years ago.

In Miami, thousands of new condo units have been built in the past three years, and more than 30,000 units ranging from about $120,000 to millions of dollars are planned within the next few years, combined with retail and office space for more than $13 billion worth of mixed-use development, said Otto Boudet-Murias, head of planning and economic development for Miami.

The supply of new units, either through converting apartments into condos or building brand new ones, is being met by an international demand.

Alberto Saiz, assistant professor of The Wharton School at the University of Pennsylvania, said several factors have fueled the condo boom. He points to low U.S. interest rates and the weaker dollar, but also to the steady stream of immigrants from South America who come with cash.

Vacation destination
Miami has long been a vacation or second-home destination for people from the Northeast United States, but low interest rates, economic problems in Latin America and the dollars� struggles against the euro have led foreign investors to target Miami as a more affordable alternative to European real estate.

�We�re getting a lot of second home buyers from New York and Chicago and Boston,� Boudet-Murias said. �Miami is also the destination of choice right now for European buyers.�

One of the brokers seeking out new foreign investors is Igor Acosta Rubio, who regularly travels to Venezuela, Colombia and Mexico. Acosta said investors in countries such as Venezuela and Argentina that are experiencing economic or political instability are looking north.

�We�re the Latin American door for the United States,� said Acosta, of America Real Estate in Coral Gables. �People there are realizing there are other governments who are more reasonable in terms of investment.�

» Continue reading "Miami condo craze luring foreign investors"

W South Beach Hotel and Residences

The Related Group and W Hotels are getting set to start taking reservations for their latest project on South Beach. The W Hotel and Residences is one of the hottest names in the hotel industry. This is your opportunity to get in at first level pricing. W Hotel and Residences South Beach will be located at 2201 Collins Avenue on the ocean. Building features include:

� 19 Floors
� 511 Units
� Studios of 600 square feet
� 1 bedrooms from 800 to 1100 square feet
� 2 bedrooms of 1200 square feet
� 5 bungalows of 1350 square feet
� Pricing from $800,000 to $8,000,000
� Fully furnished units with plasma TV
� 9� Ceilings
� 2 restaurants including Mr. Chow
� 10,000 Square foot Bliss Spa

These units are set to start taking reservations in August with a reservation fee of 10%. Checks should be made payable to the Chicago Title Insurance Company. Second 10% should be due in December. For information on the W Hotel and Residence South Beach pricing and availability please call Paul Hansen 786-586-4778.

The Atrium Aventura, located on 188th street, has officially announced the start of its resale program. The Atrium Aventura offers two, three and four bedroom floor plans. The Atrium has broken ground and should be ready for occupancy at the beginning of 07�. For current pricing and availability of the Atrium resales, please call Paul Hansen 786-586-4778.

Pending home sales, a leading indicator for the housing market, have risen to the third highest level on record, according to the National Association of Realtors� (NAR).

NAR's Pending Home Sales Index (PHSI), based on data collected for June, rose 0.6 percent to a reading of 126.3, which is 3.6 percent higher than June 2004.

The index is based on pending sales of existing homes, including single-family and condos; a sale is pending when the contract has been signed but the transaction has not closed. Pending home sales typically close within one or two months of signing.

David Lereah, NAR�s chief economist, says the index shows historic levels of home sales will continue in the near future.

�Existing-home sales will stay in record territory for transactions in July and August,� he says. �There is some volatility to the index due to the short history of seasonal factors, so we�re not predicting another record month, but it certainly is possible.� Existing-home sales in June were at the highest level on record.

Regionally, the PHSI in the West increased 3.5 percent to 128.9 in June and was 7.3 percent higher than June 2004. The index in the Midwest rose 0.7 percent to 116.3 in June, but was 1.7 below a year ago. In the South, the index increased 0.4 percent to 138.0, and was 6.0 percent higher than June 2004. The Northeast index fell 3.2 percent to 113.2 in June, but was 0.9 percent higher than a year earlier.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed. Coincidentally, 2001 was the first of four consecutive record years for existing-home sales. 2001 sales are fairly close to the higher level of home sales expected in the coming decade relative to the norms experienced in the mid-1990s. As such, an index of 100 coincides with a historically high level of home sales activity.

The feverish real estate market that hit a new peak last week has been fueled not just by historically low interest rates but also by a host of new home mortgage products that might make a banker of yesteryear keep a hand on his or her wallet.

Is the house you want beyond your financial reach? Maybe not with an interest-only mortgage. Need a loan with no proof of income or assets? You may well get one called a "no-documentation loan."

Can't scrape together a down payment? You may not need it because mortgage bankers are offering so-called 80/20 loans that combine first and second mortgages in one package, even for first-time buyers. As little as a decade ago, such nontraditional mortgages accounted for barely a sliver of the home-loan business. But in white-hot coastal markets, where housing has become unaffordable to average buyers, they have become commonplace, and they quickly are gaining ground in heartland regions, including Western Pennsylvania.

The most popular of the new mortgage vehicles are interest-only loans, which allow borrowers to defer principal payments for five years or more.

Last year, interest-only mortgages exploded to nearly 23 percent of all home loans. That was more than a tenfold increase from 2001 when interest-only mortgages represented less than 2 percent of all home loans, according to Loan Performance LLC, a San Francisco firm that gathers and analyzes mortgage market data.

In San Diego, interest-only mortgages claimed nearly half the home loan market last year, 25 times the number in 2001.

In Pittsburgh, with its relatively stable housing prices and slow real-estate market, the share for interest-only mortgages last year stood at 5.7 percent.

But even here, the appetite for interest-only mortgages is growing, said Andrew Dodd, regional vice president of Citizens Bank's mortgage unit. Four years ago, fewer than 1 percent of Pittsburgh mortgages were of the interest-only variety.

"At the high 1/8income3/8 end, we see quite a bit of activity," Dodd said.

What these new mortgage options bode for the housing market, for homeowners and for the economy remains to be seen.

For the most part, bankers deny the new products are inherently risky. The new mortgage options, they contend, are merely a way of customizing loans to suit more buyers, particularly among high-income borrowers whose earning power can't always be measured by pay stubs and whose tax and investment considerations weigh into where they deploy cash.

As for lending standards, it's not that they have changed, bankers argue. Rather, automated application processing has enabled mortgage underwriters to refine how they measure risk -- taking into account a host of factors affecting creditworthiness that could not all be considered when applications were processed by hand.

As more people take out these mortgages, however, some economists and industry analysts say there's reason for wariness. Particularly in robust markets, many of the nontraditional mortgages are being underwritten based on expectations that borrowers will see either significant appreciation in their home values or gains in income.

Moreover, current default rates, which have been falling, are not a reliable indicator of what the future holds because the most popular of the new mortgages shield buyers from the full impact of their debt for five years or more.

"We are in uncharted territory," said Susan Wachter, a real estate economist at the University of Pennsylvania's Wharton School.

Wachter said a combination of Wall Street capital and demand in markets where average housing costs have far outpaced average household incomes are among the factors behind the proliferation of the nontraditional mortgages.

One thing is certain: It's not your father's mortgage market anymore.

"You can literally walk into a bank and get a mortgage loan with no money down," said Keith Gumbinger, vice president of HSH Associates, a New Jersey-based publisher of mortgage and housing market data. "Ten years ago, that was the stuff of late night TV."

The most flexible new products are Option ARMs, a twist on adjustable rate mortgages that enable borrowers to change payment options monthly, much like credit cards. Under the options, borrowers pay interest only, or pay interest and principal, or make a minimum payment. By choosing the minimum, buyers are deferring not only principal but also interest.

In lenders' jargon, this results in "negative amortization." In plain English, it adds to the homeowner's total mortgage debt.

In addition, Gumbinger said, borrowers can get mortgages with monthly payments that amount to as much as 35 percent of their monthly gross incomes, up from 28 percent a decade ago. Total debt payments for mortgage borrowers, including credit cards, may now go as high as 50 percent of monthly gross income, up from the old standard of 38 percent, he said.

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