A hotel is often viewed as simply a weigh station; a temporary rest stop for the active wanderer. Thus there has always been something fascinating about those who take up permanent residence therein, whether they be Tennessee Williams, Bob Dylan, Marilyn Monroe or Beverly Hills 90210 character Valerie Malone. With the recent news that Anbang Insurance Group, the Chinese company that purchased the Waldorf Astoria, plans to convert up to 1,000 out-of-circulation units in the hotel to condominiums—as reported by E.B. Solomont in The Real Deal late last month—that iconic establishment joins several other luxury properties in the growing mixed-use hotel/residential game. But condominiums and hotels have very different politics in regard to their day-to-day operations, which begs some questions: Who oversees the maintenance of the former? What's the overlap between the two internal structures? What sort of buyer even seeks to purchase a unit within a hotel?
"The management end of hotel/condominium hybrids is actually two-fold," explained Doug Weinstein, vice president of operations at AKAM Associates, Inc., a property management firm in Manhattan. "You'll typically have a master association which oversees the entire structure top-to-bottom. And within that body will exist representation for the residential condominium and the hotel. Where it gets complicated is on the financial end, because certain expenses will be allocated to the residential, others to the hotel, and some will be shared. That's the main function of the master association, to regulate from whence the monies will come. The individual hotel and residential factions will filter payments through the master association, rather than paying directly for what they're responsible."
Separate But Equal
Lest you think that this division is mostly symbolic, there are oftentimes physical separation between the hotel and residential sections of the property. "Much depends on if you have one door or two," notes Marc Kotler, senior vice president of new development consulting and property management with FirstService Residential New York. "Most of these mixed-use hotels have two separate entrances with two staffs serving different types of clients. But there are going to be some shared services, and they will be part of a master budget."
While the service staff—front-of-house attendants, bellhops, concierges, housekeepers, etc.—is mostly relegated to hotel operations, there could be engineering personnel that run shared chiller systems, boilers and HVAC for the entire property, and, according to Kotler, they will be paid based on percentage of ownership. As the hotel tends to occupy a larger portion of the property than does the residential, it will pay a proportionately larger share.
The prices for these apartments are staggering. According to CityRealty, residences at The Plaza, to cite but one of these high-end locales, will cost you around $4,112 per square foot. "From my experience, it's a special kind of person who likes this type of apartment," said Janice Silver, a licensed associate real estate broker with Manhattan-based Stribling & Associates. "You used to watch these old movies where it seemed so elegant to live in hotels. It was celebrities and famous movie stars who couldn't be bothered with taking care of things themselves. It's not families looking to live in hotels; it's usually people who aren't here all of the time, as these owners tend to have other residences as well."