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(This story, in slightly different form, originally appeared in Incisive Media’s Daily Business Review.)

MIAMI-The stigma attached to condo-hotel projects is not scaring away all high-end buyers, as shown by pro basketball star Amar’e Stoudemire’s recent $5.6-million purchase of a penthouse unit at W South Beach.

Stoudemire, a four-time National Basketball Association All-Star for the Phoenix Suns, acquired penthouse No. 3 in the condo-hotel at 2201 Collins Ave. on July 10, according to Miami-Dade property records. The Lake Wales native bought the unit directly from W South Beach development partnership 2201 Collins Fee, a company led by David Edelstein.

Condo-hotels developed a bad reputation as would-be unit buyers struggled to find financing during the ongoing financial crisis, the real estate downturn depressed prices of all residential properties and a decline in tourism cut into hotel revenues. Meanwhile, lawsuits against condo-hotel developers spiked as many buyers sought to recover deposits.

Despite Stoudemire’s pricey acquisition, more pro athletes are selling South Florida properties rather than buying, even though the market downturn is pushing prices down, says broker Kevin Tomlinson of Esslinger Wooten Maxwell. Tomlinson was not involved in the Stoudemire deal.

Sales of expensive homes by pro athletes “comes and goes in waves,” Tomlinson says. “It seems like more athletes are selling than buying. [But] anybody with big money right now is very aggressive and wants a good deal. Sports celebrities are just as ruthless as everybody else.”

In the most prominent recent sale involving a star athlete, former Miami Heat center Shaquille O’Neal lost about $2.8 million when he sold his Star Island estate for $16 million. He purchased the property in 2004 for $18.8 million.

O’Neal, who was traded to the Cleveland Cavaliers, had been trying to sell the 19,440-square-foot house at 26 Star Island Drive for almost two years. He originally asked $32 million for the 17-year-old mansion.

Stoudemire, 26, does not own any other South Florida properties. The penthouse Stoudemire purchased has 2,428 square feet of air-conditioned space and a 2,020-square-foot roof terrace and a separate 393-square-foot terrace, according to the W South Beach Web site.

The 312-room hotel portion of W South Beach opened July 2. Closings on the 511 residential units began earlier this year. The units were listed from $800,000 to $15 million. About 80% of the condo-hotel units are under contract, Tomlinson says.

But the talk among brokers of luxury residences is that buyers of W South Beach’s condo-hotel units are struggling to find lenders willing to finance the purchases. Condo-hotel buyers essentially purchase a vacation home with hotel amenities. When the unit is not in use, the owner has the option to let the property manager rent out it like a regular hotel room. The unit owner and management company share the rental revenue.

“I heard that there have been only 16 closings,” Tomlinson says. “They will have a rough go of it because nobody is willing to lend to that product. Buyers will either have to go find private lenders or pay cash.

“Lenders are reticent to give loans for condos in Miami at all, and any project with a hotel in it, such as the Fontainebleau and Canyon Ranch, will not get financing,” he adds. Public records did not list financing in the Stoudemire purchase.

Condo-hotel projects became popular after the 9/11 terror attacks when financing for conventional hotels dried up. Condo-hotel developers found they could finance construction with deposits from unit buyers.

“The [condo-hotel projects] were so trendy that the hotel developers realized this was a way to get a hotel built without having to get huge loans, which they could not get after 9/11,” Tomlinson says. “People had unrealistic expectations of the performances of these condo-hotels. Now the results coming in are not what owners had expected.”

For condo-hotels to be financially viable, a buyer would have to be a part-time resident who could offset maintenance and property tax costs through the hotel program, Tomlinson says. Starwood Hotels manages the condo-hotel program at W South Beach.

The set-up could be ideal for Stoudemire, who travels around the country during the NBA’s season from October through June. However, the room rate would be so pricey only renters of Stoudemire’s financial stature could afford it.

Typically, buyers of condo-hotel properties sign a management deal to put the unit into a rental pool. During the condo boom earlier this decade, condo-hotel managers would require such agreements.

But with a dwindling group of prospective condo-hotel buyers, managers have become more flexible. “If Amar’e does not sign the [management] agreement, he has free rein to hire an outside broker to rent the unit,” Tomlinson says.

The W South Beach condo-hotel could become Stoudemire’s permanent residence if the 6-foot-10 forward decides to sign with the Miami Heat after next season. Stoudemire, who was drafted into the NBA directly from high school in 2002, becomes a free agent after the end of the 2010 season and would be free to sign with any team. Miami is likely to be in the market for a top free agent next year.

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