Developments - July 2017 - 30

BY GERI BAIN

With industry consolidation and brand expansions on the rise, property acquisition
often involves conversions of existing space. In fact, acquiring and converting existing
properties is often the only way to plant a flag in some urban areas and other prime
locales. The downside: the total price tag on a conversion can be hard to project.

"T

hese projects can be difficult to scope, budget, and execute-depending on the
age, structure, building systems, current building codes/ADA requirements,"
notes Jon P. Fredricks, president & CEO, Welk Resorts. "Once completed, these
projects often result in budget overruns (due to unforeseen conditions and
scope creep) and an owner experience that can be less than that of a purpose-built resort,
even if executed well."
"Conversions can be more expensive than new construction," says Jeff Edwards, senior vice
president of development, Welk Resorts. "Implementing new codes into an older building can
turn a remodel conversion into a full blown construction project."
Edwards says he budgets at least 20% to 25% for contingencies when doing a conversion.
"There are always surprises. It's those unknowns...what is lurking behind what you cannot
see that can drive up costs. Rarely are there up-to-date architectural drawings, so when
you start tearing out non weight-bearing walls, you often run into a main electrical line,
plumbing, or water lines and now you have to start spending money relocating them."
HVAC is also a big source of costly issues. For example, people often jimmy-rig duct work
that needs to be ripped out and brought up to code, he notes.
Conversions also can come with challenging "givens" that can't be changed, so it's
important to get detailed input from engineers, architects, and other professionals before
deciding to proceed.
"For example, while openings can be cut into structural walls, it is extremely difficult to
change a bay width, so designs must take this into consideration," notes David Desforges,
senior vice president & chief development officer, Hilton Grand Vacations Club.
Dealing with entitlements also requires attention.
"For hotel conversions, in order to achieve needed entitlements, municipalities may attempt
to attach fees in lieu of a transient occupancy tax that would have been received as a hotel,"
notes Fredricks. "And in converting a fractional to timeshare, it is important that associations,
entitlement agreements, and controlling documents provide for a timeshare use, and that the
risk of fractional owner litigation is analyzed and mitigated. Plus, zoning restrictions may not
allow for kitchens or an optimal unit mix."
After all the due diligence, some projects are better left on the drawing board. Often, the
cost of bringing a building up to brand standards will result in a higher sales price than the
market will bear. And bending brand standards is rarely an option.

30 - Developments arda.org


http://www.arda.org

Table of Contents for the Digital Edition of Developments - July 2017

UP FRONT
FIRST WORD
AROUND THE INDUSTRY
TRUSTEE TALK
MEET THE CHAIR
SUSTAINABILITY
FACES FROM THE FRONTLINES
FOCUS ON: REPUTATION MANAGEMENT
CONVERSIONS: UNIQUE OPPORTUNITIES AND CHALLENGES
CONSTRUCTION FINANCE
CONSTRUCTION FINANCE
ASK THE EXPERTS
MEMBER MATTERS
EDUCATION
MEMBERSHIP UPDATES
LAST WORD
Developments - July 2017 - 1
Developments - July 2017 - Cover1
Developments - July 2017 - Cover2
Developments - July 2017 - 1
Developments - July 2017 - 2
Developments - July 2017 - 3
Developments - July 2017 - 4
Developments - July 2017 - 5
Developments - July 2017 - UP FRONT
Developments - July 2017 - 7
Developments - July 2017 - FIRST WORD
Developments - July 2017 - 9
Developments - July 2017 - AROUND THE INDUSTRY
Developments - July 2017 - 11
Developments - July 2017 - 12
Developments - July 2017 - 13
Developments - July 2017 - 14
Developments - July 2017 - 15
Developments - July 2017 - 16
Developments - July 2017 - 17
Developments - July 2017 - TRUSTEE TALK
Developments - July 2017 - 19
Developments - July 2017 - MEET THE CHAIR
Developments - July 2017 - 21
Developments - July 2017 - SUSTAINABILITY
Developments - July 2017 - 23
Developments - July 2017 - FACES FROM THE FRONTLINES
Developments - July 2017 - 25
Developments - July 2017 - FOCUS ON: REPUTATION MANAGEMENT
Developments - July 2017 - 27
Developments - July 2017 - 28
Developments - July 2017 - 29
Developments - July 2017 - CONVERSIONS: UNIQUE OPPORTUNITIES AND CHALLENGES
Developments - July 2017 - 31
Developments - July 2017 - 32
Developments - July 2017 - 33
Developments - July 2017 - CONSTRUCTION FINANCE
Developments - July 2017 - 35
Developments - July 2017 - CONSTRUCTION FINANCE
Developments - July 2017 - 37
Developments - July 2017 - 38
Developments - July 2017 - 39
Developments - July 2017 - ASK THE EXPERTS
Developments - July 2017 - 41
Developments - July 2017 - MEMBER MATTERS
Developments - July 2017 - 43
Developments - July 2017 - EDUCATION
Developments - July 2017 - 45
Developments - July 2017 - 46
Developments - July 2017 - 47
Developments - July 2017 - MEMBERSHIP UPDATES
Developments - July 2017 - 49
Developments - July 2017 - 50
Developments - July 2017 - 51
Developments - July 2017 - 52
Developments - July 2017 - 53
Developments - July 2017 - 54
Developments - July 2017 - 55
Developments - July 2017 - LAST WORD
Developments - July 2017 - Cover3
Developments - July 2017 - Cover4
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