1. 01.10.06 REAL ESTATE, OCTOBER
High on Hotels
Never mind astronomical prices, condos built above hotels are hot
By: Joanna Kadish
Condo owners enjoy spending time in the the elegantly designed lobby and bar at the Hotel 1000.
WHEN VULCAN real estate people opened their showroom on a cold, gloomy December day last year –
basically a tent in a parking lot – and invited a few folks to drop by to see Paul Allen's latest project, a
combination luxury brand hotel with retail stores capped by condominiums a few blocks from Lake
Union, they were shocked when the entire three towers sold out within hours. "People began madly
filling out reservation forms," says Alison Jeffries, Vulcan real estate marketing manager. "I've never
seen anything like it." Jeffries says that as of summer she had a waiting list of 11,000 people for other
Vulcan projects, an estimated 5,000 residential units to be built over the next 10 years.
It quickly became apparent to Jeffries why people are so eager to sign on. Dana Hamel, a local interior

2. designer, who put down a deposit that day on a $450,000, 950-square-foot condo on the sixth-floor of
one of 2200 Westlake's three residential towers, was quoted in The New York Times in a story about the
opening as saying, "I lead a hectic life and having those amenities gives me some of my time back." He
was referring to the usual amenities of five star hotels, including valet parking, and 24-hour concierge
and maid service. Hamel is said to be looking forward to room service from the development's five star
Pan Pacific Hotel, as well as shopping at the Whole Foods Market and assorted shops an elevator stop
away. Another buyer, Felicia Brooks, an agent with Coldwell Banker, and a real estate investor with
husband, Jon, purchased because they know the hotel, having stayed at the Pan Pacific many times. The
idea of a Whole Foods clinched it, "and it's Paul Allen, a fellow Mercer Islander I figured he'd do it right,"
Brooks says.
PLEASING TECHNOLOGY
The new Four Seasons Hotel, Madison Tower at 1000 First Ave. (47 residences perched over 120-room
Hotel 1000), 2200 Westlake, Olive 8, and 190 condos over the new Hyatt (across the street from the old
Hyatt which will continue to operate), are all offering basically the same thing: luxury residences with
access to hotel services. Hotel 1000 isn't a well recognized brand although builder Murray Franklyn has a
good reputation. As of last summer, one-third of the units remained unsold although 35 percent were
snapped up at $900 per square foot before official sales began, according to Leslie Williams, a long time
real estate sales agent, with the first residents moving in this past summer. Units range from 845 to
3,850 square feet.
Wallace Wilkins, an executive coach and clinical psychologist, purchased a condo in Madison Tower in
April last year. He says he checked out 2200 Westlake and decided he would prefer living closer to the
water. "I'm looking forward to the technology," he says. "I can press a button to signal the valet which
vehicle to bring up." Hotel guests and condo owners will have access to a fully converged network
linking all aspects of technology from voice-over Internet protocol to iPod docking stations and a digital
library of the world's great art for viewing on high-definition television.
In the next few years, Seattle will have five new developments combining luxury hotels with high-priced
condominiums, virtual mini-cities studded with trendy retail, fine restaurants and sports clubs. "There's
a certain image of being catered to," says Thomas Callahan, a hospitality analyst for PKF Consulting in
San Francisco. "Going down the elevator and having a cocktail in a beautiful environment with friends
can be very appealing." He points to the confluence of high technology and biotech businesses
headquartered here. "Given the profile of the typical person moving here – highly educated, affluent
people – Seattle is highly desirable, a major gateway city with a strong economic base. Without question
there's a growth path."
Matthew Gardner, a local land use consultant, agrees. "It's extraordinary the number of people choosing
to live downtown, people who don't want to live in gridlock," he says. "It's driven by the desire to be
near mass transit, to be near shops. You see this in the creation of pseudo-urban villages in the suburbs
and more inspired architecture in the urban areas."
Branding is crucial. "You get the most benefit when condos are tied to a great brand," says Callahan.
"Some don't have that brand yet but still offer value of services, though they may take longer. It's the
corporate and upper end of tourism that's growing. Condos attached to the upper end hotels are
experiencing the most growth."
MTM Management, which manages The Sorrento, Willows Lodge and Woodmark hotels and now Hotel
1000, is banking on its expertise in running boutique hotels to go up against the better known brands.
Brian Flaherty, a 16-year veteran of the Four Seasons, was hired to run Hotel 1000 after the Four
Seasons lease ran out on the Olympic. Flaherty is hoping to attract patrons looking for a five-star quality
of service and willing to try something new. "Our customers may be younger, not committed to any
brand, but they want that high level of service," he says. "They come to us because we understand
luxury. Not everyone does."

3. The luxury hotel chains have brought new credibility to the concept of condominiums. This sort of
mixed-use development has been a fixture on the East Coast for many years, especially in resort
markets such as Florida. The Waldorf Astoria in Manhattan sold the first such condos in the 1920s and
years later, the Four Seasons opened one in Boston and another in Chicago. Investors used them as a
tax shelter until the 1986 Tax Reform Act eliminated the benefits. Nationally, there's been a hiatus,
followed more recently by a rash of construction.
The Mandarin Oriental in New York opened its doors last year with about 250 hotel rooms and 66
condos. The W Hotel in Dallas will have more than 70 residential units. Donald Trump is building a 90-
story hotel in Chicago with more than 400 residences and 200 condo-hotel units, a slightly different
version of the concept with hotel rooms sold as condos, furnished by the developer and rented out when
owners are absent with profits shared between developer and owner. Besides the Chicago property,
Trump has five other condo-hotel projects in the works in Fort Lauderdale, Miami, Phoenix, Las Vegas
and Dubai.
A SECOND AVENUE CHANCE
In Seattle, Paul Brenneke, former owner of the Avalon Hotel in Portland, with backing from Starwood
Capital, is working on a similar project for Second Avenue and Pine Street. The new hotel/condo
complex will take up most of the block between Stewart and Pine streets between the financial district
and Belltown, "an area with not a lot going on," he says. Brenneke is planning to include the hotel/condo
hybrid as well as traditional condos, a plan he had in the works in the late 1990s and had to stop,
derailed temporarily by litigation that required him to sell with an option to buy back. Now that he's got
the property back, construction is underway with first occupancy planned for 2008. There will be 115
private residences from 1,000 to 5,000 square feet priced from $550,000 to $5 million. The hybrid
condos are smaller at 650 square feet, with price tags running from mid-$300,000 to nearly $1 million.
He says he's oversubscribed, with 110 more reservations than he has units. Helping drive sales: a
100,000-square-foot spa and fitness club with a lap pool and a small, high-end grocer, along with a mix
of restaurant and retail. And like many of the new condo developments around town, there will be a dog
park.
Joining the hotel/condo construction trend, R.C. Hedreen Co., the developer of the Seattle Hilton, Crown
Plaza, Madison Renaissance and the Grand Hyatt, is building a smaller Hyatt across the street at Olive
and Pine streets that features 300 rooms and 190 condos called Olive 8. David Thyer, Hedreen's
president, says he has 70 percent of the residential units sold, including one of four penthouses priced
from $2 million to $4 million.
Back in the late 1990s, when developers Martin Smith Inc. and Beacon Capital Partners tried to interest
Seattle in luxury condominium shells at the south end of downtown Seattle, three of 19 sold in two
years at asking prices that began at nearly $1,000 per square foot. The developers of Millennium Tower
responded by building out the interiors of five units, but sales continued to limp along.
Into the picture stepped N. Jack Alhadeff, a real estate developer. He joined up with hotelier Gordon
Sondland and a condo development group at the Murray Franklyn Family of Companies who built a 24-
story tower with a hotel and 34 luxury condos on the former Warshal's site at First Avenue. No one else
had anything in the works and things stalled. Alhadeff and Sondland bowed out before the project could
go forward. As of June, Madison Tower has been built, and its first occupants have moved in.
Brenneke sees all the other roped-off construction sites that dot the downtown area like moon craters as
"nothing but positive for us." He believes there's enough room for many more such developments.
"You're going to see competition grow."
Joanna Kadish is a journalist based in Mercer Island.