Against a backdrop of falling condominium sales and high-profile failures in the hotel/condo market, two iconic Miami Beach hotels — the Fontainebleau and the renamed St. Regis Bal Harbour on Miami Beach — are marching forward with plans to convert portions of those trophy destinations into condos.

Rendering of the new Fountainebleau to be completed in mid-2008 after a $1-billion facelift.

Those big-ticket renovation and conversion projects are proceeding as statewide sales of existing condos fell by 19% in April and 30% in south Florida, relative to the year-ago period, according to the Florida Association of Realtors. Meanwhile, signs of a condo glut persist: Puig Development, a condominium converter in Hialeah, recently filed for Chapter 11 bankruptcy protection. In South Beach, the St. Augustine, a 24-room hotel/condo conversion, failed.

The success of the hotel/condo units depends on several factors, including location, management team and pricing, says Kimberly Kirschner, CEO of Kirschner Reality International in Hollywood. A number of hotel/condo projects are being marketed at unrealistic levels of $1,000 to $1,200 per square foot, says Kirschner, who is just beginning to sell condo/hotel units for the European Club in Hallandale Beach.
David Feder, president and general manager of the Fontainebleau, believes that hotel/condo projects that have failed have lacked the amenities to attract buyers, short-term rentals and tourists to those properties. Currently, Fontainebleau operates the new 37-story Fontainebleau Suites Miami Beach with 462 studios and suites. All have been sold.

“We’re very bullish on Miami Beach,” says Feder.

There are reports, however, that the St. Regis Bal Harbour has scaled back the number of units that will be sold as condos under its conversion program.

Miami Hotel Trends
	Q1 2007	Q1 2006	% Change
Room Rates	$199.86	$176.54	+13.2 %
Occupancy	79.8%	83%	-3.9%
Hotel Rooms	42,920	44,418	-3.6%
Source: Smith Travel Research