What is going on with 1 Hotel and Residences these days?
For one (no pun intended) I noticed they added 9 units to the MLS so we can all rubber neck: Redfin search. The cheapest unit is #1213. $559,000 for 692 square feet or $802/sq. ft. The most expensive is #2202 at close to $12 million for 7000 square feet. Yes that’s only $1,710/sq ft. Now those are Manhattan prices. And HOAs start at $1200 for a condo but only $600 for a suite.
Of course the Stranger mocks those who can buy flashy downtown rarely used condos in Re: Living in Heaven:
Here’s the selling point: The environmental footprint of the condos is a women’s size 2, so empty nesters can, with a clear conscience, buy a condo (for $1 million to $5 million) that they use only two months a year.
And the Seattle PI has article devoted to 1 (those PR people are certainly earning their retainer!) Buy a hotel suite for less than $1.4 million — no guarantees. The article explains the condo/hotel idea in general and how it applies to 1:
The hotel will sign five-year rental agreements with each owner, and room revenue will be split 50/50 after initial fees are deducted. That means, Raymond explained, that the units do not belong to a rental pool where the revenue from all rooms is divided among owners.
I especially like this bit:
“This is an unusual vehicle for financing that we just started seeing in the last five years,” said Chris Burdett, senior managing director at PKF Capital, a division of Colliers International. He is not affiliated with the project.
To buy a hotel room only as an investment can be dangerous — especially because it requires hotel business savvy, Burdett said.
“It’s a whole different level of investment that your layman is not going to understand,” Burdett said. “It’s new enough to be a little bit dangerous. Some people like that — it’s a new industry, it’s exciting. You get your foot into the hotel world without spending $100 million.”
An investor would have no idea of knowing whether a Seattle hotel room would gain value because the concept is new, he said, also questioning whether monthly cash flow would cover the owner’s debt expense.
1 Hotel’s management says it is selling real estate — not an investment.
Remember the other new financing vehicles introduced over the last five years and how those turned out?
The article also mentions current reservation to sales activity:
The 1 Hotel plans to convert its condo reservations to sale on Monday and the hotel suites on Nov. 10. So far, 100 people have reserved hotel suites and 30 have reserved condos.
According to someone who has a reservation that is about to convert they are raising prices after people have contracts for a lower price range. As with the other buildings that have done reservations and then jacked prices (Escala) I’m sure we’ll see less than 50% of those reservations convert to purchase and sale.