Developer opts for luxury condos instead of hotel.

It's a condo ... again.

After months designing what would have been the first boutique hotel for Studio City on Ventura Boulevard, the developers have switched gears and will propose an exclusive condominium project instead.

As other recent development proposals have shown, the market for condominiums appears too lucrative to pass up. But for The DT Group, the developer of the Studio City project, there were other considerations leading to the decision.

The rise in the prices of lumber, steel and other materials, as much as 40 percent in some cases, has made the original proposal, for a hotel with about 110 rooms, too expensive to pencil out, and attempts to acquire an adjoining piece of property that would have allowed DT to build a larger hotel, didn't pan out.

Dan Markel, president and CEO of The DT Group, said the company met with several consultants and conducted an extensive financial analysis before deciding to scrap the hotel concept.

"The comment that pushed me away," Markel said, "is someone said the problem with hotels is the guy who builds it usually loses money. The guy who buys it breaks even, and the third guy to own it makes money."

On a more serious note, Markel added that the current market appears much more conducive to condos.

"As exciting as the hotel was to do, the margins were too thin for us to go forward knowing that the demand for luxury condos in the area seems so much stronger," he said.

The company envisions a small project of 35 to 50 units, including lofts and penthouses with private entryways and private garages and Viking and SubZero appliances.

Although it' s too soon to price out such a project, it is likely that the condominiums would be the most expensive yet built in the San Fernando Valley, approaching the features and the prices until now only found in downtown L.A.

Condominium sale prices in April in the Valley dipped slightly compared with March, but were nonetheless up 13 percent over the year ago period to a median of $345,000, according to the Southland Regional Association of Realtors. At the same time, most of the 3,000 new condominium units now under development, have not yet hit the market, and they are priced considerably higher than the older stock.

DT's other multifamily project now under development, Noho Lofts, was originally developed as a rental property, but the company has received so many inquiries from buyers interested in purchasing the innovative units that DT is exploring a conversion.

"Due to the demand and overwhelming interest, we are considering mapping them for condos," said Markel.

The complex will open as planned as a rental property, but if DT decides to move forward with the condominium conversion, the company will later offer the units for sale.

Senior reporter Shelly Garcia can be reached at [phone] or by e-mail at [e-mail].