Why are property developers attracted to hotel-enhanced mixed use?
Jim Butler: Developers have been able to use premium condo unit values to help offset rising construction costs and a dearth of financing for new hotel development. An owner may be able to assemble a better “capital stack” with mixed real estate uses—with the total package of equity, senior debt and mezzanine financing being better. This is because well-planned and executed hotel-enhanced mixed-use projects create a premium value for the project that is greater than the sum of each of the components—the whole is greater than the sum of its parts. Many new projects—particularly from the mid-scale, full-service segment and up—will be developed only where the hotels are combined in mixed-use projects with residential, retail, entertainment and other types of commercial real estate product. Advisor: Where are hotel-enhanced mixed-use properties being developed? Jim Butler: All over! This concept has global application and appeal. In the last five years alone, we have assisted clients with
