(Bloomberg) -- When Mandarin Oriental’s latest property on the West Coast opens in Beverly Hills, Calif., in mid-2022, guests will be able to show up with their luggage and have a bellman escort them up a private elevator to a penthouse with its own attended lobby and six-car garage. On the deck of a rooftop pool lined with white-curtained cabanas, they’ll be able to enjoy some Mediterranean-inspired twist on eggs Benedict designed by chef Daniel Boulud, who’s also new to LA. And the concierge will be equally well versed in local dog grooming outfits and the best new restaurants in the area—which hasn’t seen significant real estate development like this in a decade.
Did you catch the clues to a major caveat?
The project, which is unlike anything Mandarin Oriental has done before, won’t contain a single hotel room.
Instead the Mandarin Oriental Residences, Beverly Hills will be condos-only, with 54 apartments across a glassy new 323,000-square-foot, seven-story structure at 9200 Wilshire that sprawls over a full city block.
The residences, which open for exclusive private previews this month and start at $3.6 million for a 1,200-square-foot, 1-bedroom, 1.5-bathroom apartment, represent the first standalone condo project for the Hong Kong-based hospitality brand. Other hotel companies have thus far dabbled in mixed-use projects that blend both residential and transient dwellings. Mandarin has latched onto a trend in which luxury outfits, including Montage and Ritz-Carlton, have gone full tilt into residential real estate to drum up big revenue amid the high costs and thin margins of building and running hotels. The building’s two penthouses, each with their own lobby, elevator, garage, and staff, will cost up to $40 million.
“Sometimes we have to get creative with what’s available,” says Todd Ruff, director of residences for Mandarin Oriental Hotel Group. Speaking by phone from his office in Atlanta, he explains that premium real estate in key markets like LA can be so hard to come by that even a top brand can take many years to plant its flag there. “Residential propositions are a no-brainer … and a business model that we’re very bullish on.” They help companies like Mandarin scale faster, more efficiently, and with returns that are more favorable to private equity investors, he adds.
“This is one of the most highly sought-after markets that Mandarin has been trying to get into,” Ruff says of Beverly Hills, “but there were constraints we had to deal with, and while we’re still searching for a hotel in LA, this was entitled as a residential building so we went ahead with that.”
The real estate deal was negotiated by Michael Shvo, the New York-based developer, who knows a thing or two about mixing residential concepts with hotels. Among his long list of projects is the Aman New York, with 20 condos from $5.9 million, and another Mandarin Oriental Residences just blocks away at 685 Fifth Avenue (in the old Gucci headquarters on 54th Street), which like its Beverly Hills counterpart, is slated to open in mid-2022.
Shvo bought the long-vacant lot at 9200 Wilshire for $130 million with a partner in 2019 and, inspired by the premium location, decided to bring in a brand with a track record for luxury service, he says. “Mandarin is at the top of their game when it comes to that. When I travel, I know that company delivers some of the best service you can get in a hotel. Plus, the brand itself is fairly exclusive,” he continues. “They only operate around 35 hotels around the world and are extremely selective about where they go.”
Some of the units will come furnished; others can be designed in collaboration with clients, he says: “What we’re creating is a stress-free lifestyle, where you will be taken care of whether you are spending three days a month or 30.” All units can be stocked with Mandarin Oriental toothbrushes and bathrobes and will share access to a gym, small spa, and concierge team. Housekeeping services will be available on request.
“This is where the luxury world is going,” contends Shvo, who says the benefits of nixing hotel rooms from a hotel-branded condo include increased staffing efficiencies as well as privacy. “Ultimately it doesn’t matter how much money you have, it’s your headache when something goes wrong in your home,” he argues. Unless, of course, you’re not the one staffing and maintaining it.
As for the pricing, Ruff says Mandarin is used to raising the bar: “We create new pricing benchmarks for our markets. A 20% to 40% premium over the top class in the marketplace is standard for us.”
At an entry-level cost of around $3,000 per square foot, the price point is almost triple the area’s average of $1,131, according to research from Douglass Elliman. But it’s not as high as what’s being sold by Montage Hotels & Resorts, whose new Pendry-branded residences in West Hollywood broke LA sales records in August. Two of 40 condos that have begun trickling onto the market as part of its mixed hotel-condo project on the old House of Blues site sold that month for around $13 million each; at $4,848, one of them set the city’s highest price per square foot, according to the Los Angeles Times. The other wasn’t far behind, at $4,500 per square foot, far exceeding the neighborhood’s standards.
Regardless, Mandarin’s quest to push the standards of condo living won’t end in LA and New York. While the company has opened only seven properties with residential components in its almost 60-year history, that number represents the bulk of what’s to come for the brand. “Over the next four years we will triple, or at least double, our growth [in this arena],” says Ruff, pointing to new Residences projects in London’s Mayfair neighborhood, Tel Aviv, Grand Cayman, Honolulu, Boca Raton, and Barcelona.
“The list goes on and on,” he says. “We’re a strong believer in this business model—even in the next 12 to 24 months, there’s a lot in the hopper that we’re expecting to bring to fruition.”
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