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IconBrickell’s Hotel Program Was Cancelled – Tips For Investors

March 22, 2017 by Sarah Elles Boggs

Icon Brickell Tower 3

News broke last May that IconBrickell’s Viceroy Hotel was being sold to Starwood Hotels. The 148 room hotel began a renovation and was rebranded as W Miami in a $64.5 million deal that included hotel rooms, 15th floor restaurant, and access to the 10 acre amenity deck. What was not included was the hotel program, which allows unit owners in Tower 3 the option to have the hotel to lease their units on a nightly basis to hotel guests. The program was cancelled.

We receive a lot of requests from investors who want to purchase a condo in Miami to rent out for most of the year and then retain the ability to use it during the times when they would like to visit. For this type of investor, hotel programs have always been a popular choice, although they are not as plentiful as one would expect. They are also not as profitable as one would expect.

In the investor’s eyes, they are granting the hotel the right to lease their apartment to hotel guests. The apartment owner does not need to manage those guests or the apartment, they just give notice to the hotel that they would like to use their apartment on certain days and then collect checks. It’s not so easy or profitable.

What isn’t usually mentioned is that the hotel only rents condo/hotel apartments to the hotel guests after the hotel is already at full capacity. The condo/hotel unit owners are only getting the overflow guests, and since the average occupancy rate for 2016 was 75.9%, the vacancy rate could go quite high. From that amount that the guests pay, the owner receives a percentage of their daily rate minus a management charge and reserve account charges. They also lose the right to determine how the unit is furnished, as it must follow the design guidelines of the hotel brand. Even with all of these fees and regulations, the owner is still required to repair damage to the apartment in the event that a hotel guest is rowdy.

Since the introduction of AirBnb, many investors have abandoned condo/hotel investments in favor of the online booking service, even though it is fully illegal in Miami Beach and not allowed in condo buildings from other areas. Most of the buildings in the Greater Downtown area (Brickell up to Midtown) require at least 6 months of minimum lease term, although a few have begun to allow rental terms of as low as one month. Finding a building that allows daily rentals is extremely rare in this area.

Even if Miami is successful in introducing similar ordinances to the aggressive $20,000/infraction fine that Miami Beach is enforcing, there are private companies who manage short term rentals that do follow the rules. These could fall under the category of vacation rentals or corporate rentals. It gives the investor more control of the apartment without having to be hands-on with the guests’ stay.

So, here we have a great investment opportunity! Tower 3 at IconBrickell allows daily rentals, making it a great spot for AirBnb investors (or other corporate rental investors). The investors are able to have more control over their investment and occupancy rates, while still reserving the right to use the apartment at their leisure. I like it.

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