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Condo-hotels debut along the beaches

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Communities scramble to regulate new “hybrid” concept as demand for units surges. By WAYNE AYERS Article published on Wednesday, Sept. 8, 2004

GULF BEACHES – Condo-hotels, where individual investors have the opportunity to own units in a tourist accommodation facility, is a concept that is gaining a great deal of popularity nationwide and is beginning to gain momentum in Pinellas County.

As a hybrid which incorporates features of both a hotel and condo, the condo-hotel does not neatly fit into existing sets of rules and regulations. So, the beach communities where the concept has surfaced are in many cases scrambling to research the idea and develop ways to deal with both the opportunities and pitfalls that the condo-hotel phenomenon presents.

A condo-hotel, as defined by Treasure Island, which has a number of projects now in various stages of development, is “a hotel composed of units that are owned by an individual, corporation and other legal entity” where the units are available for guest rental on a daily, weekly or monthly basis.

The opportunity to own individual units in what is essentially an upscale suite hotel has apparently turned investors on to the concept in areas ranging from the ski resorts of Colorado to nearby Orlando. Mike Nadeau, building official of Redington Shores, definitely sees a local market for condo-hotels.

“Families coming to the beach are wanting more than a hotel room,” he said. “These are people planning to stay two to three weeks. They want a suite, and these (condo-hotel) developers are mostly planning large units with comparable amenities.”

Redington Shores Town Administrator Don Lusk added that the concept is clearly “market driven.”

A patchwork of regulations

The arrival of requests from developers to put up condo-hotels have left municipalities up and down the beaches looking for a way to deal with a type of property that doesn’t fit into existing land development regulations. Being neither condo nor hotel, officials in most communities are tending to view the hybrid concept as having mostly characteristics of a transient or tourist, accommodation.

“We treat condo hotels simply as a transient accommodation,” said Paula Cohen, community development director of Madeira Beach, which has two projects in the works.

As the city allows more hotel units to be developed on a given acreage than condos, Cohen said that site plan reviews of any proposed condo-hotel project are critical to assure that the property is actually developed as planned.

Madeira Beach allows 30 to 40 tourist units to be built per acre versus only 15 to 18 for a permanent residence (condominium) use.

Cohen said, “We want to make sure that people do not pose a development as a condo-hotel to get the maximum number of units and then build it as a condo,” she said.

Cohen has the responsibility to review each site plan to determine if the development is meeting the appropriate criteria.

“In the case of condo-hotels, I look for characteristics of a hotel development, such as a common area, lobby, desk clerk, etc.,” she said.

Transient facilities in Madeira Beach also cannot be lived in full time by owners, a standard regulation of all the beach municipalities surveyed. Owners are not allowed to claim a homestead exemption on the property.

“It is very difficult to monitor the units for compliance,” Cohen said, “so we need to make the determination up front that they will be used as planned.”

Cohen said that a portion of the Madeira Bay development and a project planned to replace the Skyline Motel property – both on Gulf Boulevard – are proposed as condo-hotel properties in the city.

Site plan reviews also figure prominently into Redington Shores’ regulations, according to Building Official Nadeau. “The town’s one condo-hotel proposal thus far, Harbor Cove, has generated a lot of debate and discussion at recent town commission meetings over intentions for the project,” he said.

Redington Shores has a Commercial Tourist Facility (CTF) zoning district where transient accommodations, including condo-hotels, are allowed, and a Residential-Medium (RM) district where residences and condos may be built.

Redington Shores’ concern is that proposed residential and tourist development go up in the appropriate zones where they are allowed.

Nadeau said the initial proposal of 1,500- to 2,000-square-foot units for the Harbor Cove condo-hotel project “looked suspiciously like a condo development.” So the town placed an 850 square foot maximum on condo-hotel units.

Redington Shores has initiated development agreements which condo-hotel developers must adhere to and that, in Nadeau’s words “ties them into building exactly what they propose.”

The drawback is that the development agreements have a state-mandated life of five years, which Nadeau said may be extended to 10 years. After that time, should a condo-hotel project be converted to condos, the only recourse is to take the owner to court.

In Treasure Island, where a very active condo-hotel market has emerged, the city is continuing to develop an extensive series of regulations relating to the concept.

A cornerstone of Treasure Island’s policies is the F.A.R., or Floor Area Ratio. Lynn Rosetti, T.I. city planner, explains that the F.A.R. limits the amount of gross building area based upon the size of the lot.

“The Floor Area Ratio radically limits the square footage of the building and in turn the size of the individual units,” Rosetti said.

By applying the F.A.R., the idea is that condo-hotel developers will keep units relatively small, in keeping with the size of hotel units, to maximize the number of units that can be developed and marketed.

The city of Treasure Island allows hotel construction of 22 to 50 units per acre, depending on the zoning, versus a maximum residential/condo density of 15 units per acre. As T.I. defines a condo-hotel as a form of transient, or hotel, accommodation, Rosetti said that it is important for the city to make sure that developers do not come in with a condo-hotel proposal and later have owners convert their units to condos.

In addition to the F.A.R.’s, Treasure Island uses other tools to deal with its burgeoning condo-hotel construction. Among these are specific regulations relating to condo-hotels, site plan reviews and code enforcement.

“Our regulations state that the units must be small and we impose a tourist tax and do not allow homestead exemptions on condo-hotel units,” Rosetti said.

The condo-hotel regulations also state that units must be available for guest rental on a daily, weekly or monthly basis and cannot be used or owned as timeshare or fractional units. A clause that the occupancy of the units must change at least twice in a six-month period and six times over a year precludes use as a full-time residence.

Rosetti said that site plan review of proposed condo-hotel developments up front is an existing part of T.I.’s control process. “I look at these and ask ‘Does it look like a hotel?’”

Rosetti said that she looks for characteristics such as a front office area which is inviting to the public, smaller “hotel suite” size units, water views that tourists often demand and a unit set aside for a resident manager. She said that hotels also tend to have more green space and fewer parking spaces than condo developments.

Treasure Island’s condo-hotel projects include proposed developments for the Surf, Ramada Inn and Algiers motel properties and the Suntasia office building.

The largest beach city, St. Pete Beach, has not seen a lot of condo-hotel activity thus far, according to Kurt Holley, director of the city’s planning department. But Holley said that interest is high among developers and he says that the city has regulations in place to make sure that condo-hotel developments are built and used as transient accommodations.

Holley said that St. Pete Beach is primarily a resort community and a lot of business there is dependent on tourist spending. He said that the city is less concerned with how new developments are owned and financed than with their economic impact.

“We want to maintain our tourist base, so our aim is to investigate the proposed operation of a planned condo-hotel project so that we can be reasonably sure that it will be a hotel,” Holley said.

St. Pete Beach limits hotel units to a maximum of 700 square feet, a regulation that Holley feels will, in itself, probably preclude use as a full-time residence. Nonetheless, Holley said that the city “will take a long, hard look at each proposal on an individual basis.”

Each new development in St. Pete Beach must pass before a Development Review Board composed of seven residents. Then it is reviewed by city staff and finally has to go before the City Commission.

“Every project gets a pretty extensive review before final approval,” Holley said. As developments are difficult to monitor for compliance once they are built, Holley said that it is important to understand up front what the physical characteristics of each project are, so that a reasonable determination can be made that they will be used as planned.

The city of Indian Rocks Beach has one condo-hotel project in the works, slated for the property now occupied by Uncle Milt’s Cottages. Community development director Peter Pensa said that the city does not allow more units for tourist accommodations versus condos, but does allow more units per acre in the commercial/tourist district west of Gulf Boulevard.

“We allow 15 units per acre east of the boulevard and 30 per acre west,” he said. Hotel/motel units have a minimum size of 250 square feet under city regulations, while condo units are larger, a minimum of 750 square feet.

Condos must set aside two parking spaces per unit versus one per unit for tourist facilities. The city code does not have any specific requirements for condo-hotels, but they are considered a tourist accommodation.

Because Indian Rocks Beach does not allow more units for tourist developments, the concern that condo-hotel units could convert to condos is not as great there, Pensa said.

The impact of condo-hotels is just beginning to be felt in Clearwater Beach, with one development now on the drawing boards, according to Clearwater senior planner Wayne Wells. There, the city is requiring developers to declare up front whether the units are an overnight accommodation or attached dwelling (condo).

“Condo-hotel is a hybrid term but we look at a project as being either a hotel or a residence, there is no in-between.” Wells added, “We care less about what they call it than its intended use.”

Because Clearwater Beach allows a 40 unit per acre density for hotel units versus 30 for attached dwellings, Wells said it is important that the city determine up front what each proposed development is. Clearwater has no square footage restrictions, which Wells said makes it even more critical that the city look closely at each project and correctly determine its use.

“We are concerned because of the density disparity (between the types of uses) that a ruse could be attempted to gain more units,” Wells said.

Like other beach communities, Clearwater looks for earmarks of a hotel such as a front office area operated seven days a week when evaluating condo-hotel proposals. Also, length of stays in a hotel cannot exceed 30 days, precluding using the units as a permanent residence.

The remaining beach municipalities have experienced limited condo-hotel activity and are mostly handling proposals on a case-by-case basis.

Larry Nayman, building official in Indian Shores, said that the condo-hotel concept had come up in connection with one property, but that no site plan had been submitted as yet.

“Our ordinances do not address (condo-hotels), so if it does materialize, we will treat it as a hotel,” Nayman said.

A condo-hotel is not a “permitted use” in North Redington Beach, according to Town Clerk Sharon Proehl. Proehl said that the town is looking at adding a condo-hotel definition to a planned update of their comprehensive plan.

“No one has applied yet (for a permit), although some (existing hotel) owners have talked about it,” she said.

In Redington Beach, Town Attorney Dominic Amadio said that there is only one piece of property in town suitable for condo-hotel development. That property, now occupied by two adjacent hotels, has recently been bought and the owners have applied for a building permit to construct a condo-hotel on the site. Amadio said that the town is dealing with the situation as it progresses.

A win-win deal

Condo-hotels are a wave of the future whose impact is just beginning to be felt along the Pinellas beaches, according to Gail Byrne, managing director of Gail Byrne and Associates in Treasure Island.

Byrne is the area’s largest developer/marketer of condo-hotel properties, having brought 230 units to market, including the Surf Beach Resort, Sunset Vistas on the Gulf, Carol Ann and South Beach Condo Hotel developments, all in T.I.

Byrne’s condo-hotel projects have sold quickly. She had so many buyers for her latest project that she had to conduct a silent auction and take sealed bids for the units.

“I am currently all sold out of condo-hotel units,” she said.

Byrne said that the demand for condo-hotels is fueled by the rental income they bring and the fact that buyers can use the units themselves if desired, on weekends or during the season. They feature on-site management to assure hassle-free rentals.

Byrne’s condo-hotel units average 850 square feet, much smaller than typical condos, and feature two bedrooms and two baths.

“Renters like the added space relative to hotel rooms, and owners appreciate the capability to rent out their units as often as they want,” Byrne said. He added that condo-hotels offer “a very flexible concept for people looking for a rental income.”

Though condo-hotels have built an impressive track record in places like Miami, Las Vegas and the Colorado ski resorts, they “just came up out of the blue here,” according to Byrne.

County assistance, guidelines are forthcoming

As the beach communities scramble to develop regulations to deal with the burgeoning concept, Pinellas County is looking to provide assistance and bring some consistency to the current patchwork of local rules. Mike Crawford of the Pinellas Planning Council (PPC) said that the PPC sees a definite need for guidelines at the county level to help the beach municipalities deal with projects as they arise.

“The county rules right now are much broader (than condo-hotels), and we need to put together a definition that can be applied consistently across all of the communities,” Crawford said.

Crawford said that the PPC expects to convene its planners advisory committee, which includes local planners and developers as well as county officials by early 2005 to work on the issue.

In the meantime, Crawford said that the PPC is currently available to advise any communities looking for assistance. “We have staff that can look at site plans and provide direct local assistance if needed,” he said.

Investors, beware

The current outlook is for the condo-hotel concept to continue to spread and pick up momentum along the Pinellas beaches. As developers and Realtors seek to cash in on the idea and replicate the success of Gail Byrne and others, more and more units can be expected to be brought to market.

The concept is relatively new to this area and consistent regulations controlling development have yet to be developed. Potential buyers need to keep an open eye to marketing pitches and look for developers with a track record.

The condo-hotel as an investment is not without pitfalls. As a hybrid concept, buyers need to be sure they are buying what they are looking for. There have been instances of condo-hotel projects being marketed as permanent residence condos.

The condo-hotel appears to be an investment concept that matches the accommodations needs of a growing number of both owners and renters. The next few years will tell if the idea will withstand the tests of the marketplace.


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