1618-14 Financial squabble halts construction of two towers mh
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mh FINANCIAL SQUABBLE HALTS CONSTRUCTION OF TWO TOWERS 02/25/2004
THE MIAMI HERALD
Copyright (c) 2004, The Miami Herald
DATE: Wednesday, February 25, 2004 EDITION: Final
SECTION: Business PAGE: 1C LENGTH: 80 lines
ILLUSTRATION: color photo: Riccardo Olivieri (A)
SOURCE/CREDIT LINE: BY DOUGLAS HANKS III, dhanks@herald.com
MEMO: REAL ESTATE
FINANCIAL SQUABBLE HALTS CONSTRUCTION OF TWO TOWERS
Construction has stopped at the Bentley Bay condominiums in the wake of a
split between the developer and builder that the developer says has pushed the
$88 million South Beach project to the brink of bankruptcy.
Developer Riccardo Olivieri said construction should resume next week with
a new contractor, ending a three-month hiatus at the twin towers facing
Biscayne Bay at 540 West Ave.
The ongoing delays - Olivieri said the 24- and 26-story towers are about
two years behind schedule - stem from an escalating battle between Olivieri
and contractor Keystone Construction, with both companies blaming the other
for the problems.
The north tower is now scheduled to open in April, with the south tower
expected to finish in the fall. But the looming completion dates won't rescue
the bottom line of the project: Olivieri said the $18 million in profits he
expected when he launched sales at the end of 1999 have now vanished, leaving
him and his investors with a loss of at least $8 million.
"I have agreed to lose all of our profits and most of our investment in
order to complete the project, " Olivieri said. "I'm funding the company at
this point. "
He accused Keystone of mismanagement and incompetence, saying the
contractor missed deadline after deadline. But Keystone, a Miami-based
contractor, claims it was Olivieri's lavish and capricious approach to the
project that doomed the venture.
The Italian developer, who counts the Saudi royal family as former clients,
insisted on using expensive imported materials that either took too long to
arrive or didn't fit the specifications of the gently curved towers, Keystone
President Rene Diaz de Villegas said in an interview and in documents. He also
said the plans for the towers kept changing, forcing his crews to redo work
and causing the project to run behind schedule and over budget.
"No sooner are we ready to commence an activity [than] a change comes
along resulting in extra costs and time delays, " Diaz de Villegas wrote
Olivieri in July. The alterations "make it nearly impossible for any one to
be able to maintain a schedule and a firm grasp on a realistic completion
date. "
Keystone has filed an $8.6 million lien against the property, claiming
unpaid fees. Diaz de Villegas said Keystone received its last payment in July
and stopped working in November or December.
Meanwhile, Olivieri said that in July he began paying $135,000 a month in
personal funds to keep the project running and the development out of
bankruptcy.
The problems come during one of the largest building booms in the last 20
years for South Florida, as high-rise developers scoop up sites to capitalize
on low interest rates and a strong housing market.
Demand for high-end projects remains strong. The Ritz-Carlton Key Biscayne
sold out within months of going to market, and property values have already
increased, Weiser said. At the Ritz in Coconut Grove, 117 names are on the
waiting list to see 88 units in the site's second tower, said the project
manager, Veronica Cervera. Half of The Setai has sold out since it went on
sale in January.
The St. Regis has sold 27 of its 29 units since the Fort Lauderdale project
went on sale two months ago. One of the first buyers to step to the plate was
Les Turchin, an investor who spent close to $10 million for a
9,000-square-foot, two-level penthouse suite that is wrapped by a quarter-acre
of balcony space.
"Owning my apartment in a hotel is as good as life gets, " said Turchin,
who also owns an apartment in Manhattan's uber-luxe Carlyle hotel.
"Everything is done invisibly. It's about as first-class as you could
possibly want. "
A less-tony tier of condo hotel market enables owners to rent their condos
out. These properties are generally smaller and more like a hotel room, less
of a second home and more of a vacation site.
Condo buyers in the for-rent market see themselves as investors, Winston
said, and believe renting will cover their monthly mortgage.
'That's the perception that drives this market, " he said. "Those
projects have either not yet closed [or] gone through the full rental season,
so the jury is still out. "
Unlike timeshares of yore, these properties are run by a hotel management
team, like Sonesta, which will manage the Ocean Grande in Sunny Isles Beach,
the Roney Palace and Capri, both of whom use in-house management, and the
Fontainebleau II, which is run by Hilton.
"It allows you to generate revenue when you're not there, " said Michael
Cohen of Cohen and Co. Creative, a marketing consulting company. "And you
know the units are maintained; you know it's kept clean. "
While away, condo owners keep their possessions under lock and key. Most
receive 50 percent of what the hotel charges the guests, and suites can be
rented nightly, weekly or monthly depending on the hotel's terms.
Condo hotels are not unique to South Florida - luxury projects already
exist or are under way in Sarasota and Naples, Fla. , Washington D.C., Boston
and New York - but their numbers are growing. At least 15 condo hotels are
under construction or newly opened in Broward, Miami-Dade and Palm Beach
counties.
Industry watchers trace the growth in for-rent condo-hotel units to the
region's influx of foreign nationals. Condo hotels have long been a staple in
Europe and Latin America, where developers are forced to seek alternative
financing routes to increase cash returns.
"Interest rates are 20 percent in some Latin American countries, " Berman
said. "Building condo hotels was sometimes the only way hotels could be
developed. "
As a result, Latin Americans are more accustomed to renting out condo
hotels, and the concept of owning and renting out condo hotel units migrated
to South Florida along with them.
"It's a very common ownership structure for hotels in many South American
cities, " Keb said.
On the condo side of the Ocean Grande, for example, ownership is divided
evenly between foreign buyers and Americans, most from the Northeast,
according to one of its developers, Gil Dezer. On the condo hotel side, 70
percent of the buyers are South American.
"New Yorkers are like snowbirds and spend six months here, " Dezer said.
RESORT VIBE
South Florida's attractiveness as a destination ripens the market for
hotel building boom. For buyers like Rockmore, deluxe condo hotels intertwine
five-star service with the perks of ownership.
"I wanted services, " said Rockmore, who is based in New York. "I want to
be able to call ahead of time, have the living room cleaned up, set up for a
party. Just like everyone in the world is too busy, so am I. "
For real estate developers, mixed-use properties like condo hotels help
solve the riddle of financing: they are attractive to lenders because a chunk
of the money can be recouped up front.
"The basic premise behind condo hotels is that it's another financing
vehicle, " said Scott Berman, a hospitality analyst with
PricewaterhouseCoopers.
"It's a way to raise capital without going to a traditional institution.
And money is tight. "
John McDonald, a developer behind the St. Regis condo hotel in Fort
Lauderdale, said the tremendous debt that accompanies luxury hotel development
- the Ritz-Carlton Key Biscayne, for example, cost $176 million - dictated his
project's composition from the outset.
You can scarcely afford to build a stand-alone high-end luxury hotel
today, " he said. "This makes financing much more attractive to lenders
because it diminishes the risk substantially because you have the condo sales
coming in immediately. "
At the uppermost tier of condo hotel hybrids are the Four Seasons, St.
Regis, Rosewood, Amanresorts and Ritz-Carlton varieties, where private units
are kept separate from the hotel and never rented out for public use.
Access to the hotel's facilities, like the pool and gym, are included in
fees, while frills like room service, manicures and dry cleaning cost extra.
Buyers in this strata can pay monthly service fees of up to 25 percent more
than comparable condos for the hotel's trappings.
At that level, you're dealing with people who have two, three and four
homes - a super luxury, international crowd, " said Jack Winston, a senior
consultant with Goodkin Consulting, a strategic partnership with
PricewaterhouseCoopers. "They're recession proof. They'll use it a few times
a year, and when they don't use it, they lock it up. "
One exception to the rule is the Ritz-Carlton Key Biscayne, perhaps the
only known high-end luxury property where a coido can be rented as part of a
five-star hotel.
''This is something the Ritz-Carlton sort of inherited, " said Doug Weiser,
who with his father, Sherwood, makes up half of the resort's development team.
We were trying to be creative and find different ways to get the hotel
financed. This made it more palatable to the lenders. "
One hundred of the resort's 188 condo owners are allowed to rent out their
units, effectively upping the Ritz's available hotel room count by a third.
The units are smaller, and furnished and decorated by the developer to
facilitate easily conversion to a rental unit.
The Ritz-Carlton does not plan to manage other convertible condo hotels for
precisely the same reason that other deluxe lines avoid them: it is deemed too
risky for their five-star name.
"Customers coming to the Ritz-Carlton or Four Seasons expect a certain
level of quality, " said Phil Keb, Ritz-Carlton's vice president of
development. "We could potentially lose our ability to control the product in
a guest room in the lodging component. What if the owner burns a hole in the
bedspread with a cigarette and doesn't replace it ? Or spills red wine?"
The Ritz has a contractual arrangement with the Weisers for maintenance,
repairs and replacements, but inevitable wear and tear, and the issue of
paying for upgrades, remain points of concern.
"That's why we view Key Biscayne as an anomaly, " Keb said.
DEMAND HIGH
One of the biggest perils in the rush to build is time: Delays in
construction mean extra loan payments and ballooning budgets, consuming
profits month by month.
"The costs can eat you up in no time, " said Rafael Kapustin, who
partnered with the Related Group for the two Loft condominium projects in
downtown Miami.
Prices on the 170 units at the Bentley Bay range from $400, 000 for a
one-bedroom apartment to more than $1 million for a penthouse. Olivieri said
about 70 percent of the units are sold.
The idle construction site at one of the most prominent pieces of South
Beach real estate - a waterfront parcel at the foot of the MacArthur Causeway
- marks a sharp reversal of fortune for Olivieri, who has built projects
across Europe and the Middle East, including luxury residences for Saudi
royalty. He said he came to South Florida in 1988 and began building homes in
Coral Gables and Pinecrest, then bought the Bentley hotel in South Beach in
1994.
His plan was to expand the Bentley name to a pair of nearby parcels: a
bayside condominium project and an oceanside hotel to be named the Bentley
Beach. He picked Diaz de Villegas to build both.
Olivieri said his Bentley Bay lender, Colonial Bank, suggested he hire Diaz
de Villegas and that it made sense to have the same contractor on both
projects. In a statement released Tuesday, Colonial Bank denied trying to
influence Olivieri's choice of contractors.
CAPTION: PATRICK FARRELL/HERALD STAFF HOPEFUL: Developer Riccardo Olivieri,
next to a model of the Bentley Bay towers, said construction should resume
next week.
KEYWORDS:
TAG: 0402270403
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mh CONDO-HOTELS HAVE LONG BEEN A STAPLE IN EUROPE AND LATIN AMERICA 08/20/2001
THE MIAMI HERAIID
Copyright (c) 2001, The Miami Herald
DATE: Monday, August 20, 2001 EDITION: Final
SECTION: Business Monday PAGE: 6G LENGTH: 229 lines
ILLUSTRATION: color photo: (On the cover) Steve Rockmore of Residential
Realty Advisors at The Setai in Miami Beach (a) ; photo: Leo Ickowicz (a) , a
model of the Acqualina condo-hotel in Sunny Isles (a) , artist's rendering of
the St. Regis in Fort Lauderdale (a) , John Centralla in his kitchen (a)
SOURCE/CREDIT LINE: By CARA BUCKLEY, cbuckley@herald.com
MEMO: COVER STORY; see SELECTED PROPERTIES at end
CONDO-HOTELS HAVE LONG BEEN A STAPLE IN EUROPE AND LATIN AMERICA
Steve Rockmore is hooked on a feeling. A luxury housing consultant with a
weakness for posh hotels, Rockmore yearned for hotelier Adrian Zecha's imprint
to arrive in the United States.
"They have this very Asian feeling, very Zen, " Rockmore said of Zecha's
ultra-luxurious Amanresorts. "I wanted this feeling here and I wanted to live
with it. "
When Rockmore learned that Zecha was bringing The Setai luxury residences
to South Beach, he bit. The clincher? That Setai would be a ,condo hotel.
Condo hotels are sprouting up in South Florida in concert with the luxury