Thayer Lodging Group’s recent $460 million purchase of Hollywood’s Westin Diplomat Resort could represent the peak of a feverish hotel investment cycle in South Florida, industry observers say.
On top of that hefty price tag, Maryland-based Thayer spent another $75.5 million on adjacent land and a golf course, and announced plans to invest $100 million on improvements to the 998-room resort. The extra spending gives Thayer an opportunity to add value, despite a seemingly unprecedented purchase price in the tri-county area of South Florida.
Other investors looking for similar opportunities in the region could be out of luck, however.
“The window is closing,” Bilzin Sumberg attorney Bryan Hawks told The Real Deal. Hawks is a partner in the firm’s Real Estate Group.
The Westin trade is undoubtedly one of the most expensive in the history of South Florida’s hospitality market. Lodging & Hospitality president Guy Trusty, who has worked in the region’s hotel sector for nearly 30 years, can’t recall a tri-county area sale that exceeded $460 million.
“This probably set the record,” Trusty told TRD. “What else could sell at that number?”
Trusty noted the iconic Fontainebleau Miami Beach, which is not on the market, could potentially fetch a similar price per room to the $461,000 Thayer paid for the Westin.
To find comparable transactions in Florida, industry watchers had to look north to theme park-hub Orlando.
In August 2013, Hyatt Hotels acquired the 1,641-room Peabody Orlando for $717 million. Seven years earlier, Thayer sold the 1,582-room Grande Lakes Resort for $753 million. That deal included a 584-room Ritz Carlton and a 998-room JW Marriott.
While the $460 million Westin sale is “a pretty big ticket in South Florida,” the seller, the United Association of Plumbers, could have commanded a bigger price if it put the resort on the open market, according to Gregory Rumpel, managing director of JLL’s Hotels & Hospitality Group.
Broward and Palm Beach counties are becoming popular with some South Florida tourists looking for more affordable room rates and easier airports to navigate, according to Hawks. The beachside Westin has the potential to attract high-end clientele who would normally stay in Miami Beach.
“It makes sense to go 30 miles north,” Hawks said. “You get more bang for your buck.”
A major hospitality player, Thayer has the attention of industry observers who are curious to see how the company enhances the Westin site.
Thayer is a privately-held company that has completed 44 hotel investments totaling about $2.7 billion, according to its website. It owns five additional hotels in South Florida, including the Miami Airport Marriott and Sheraton Miami Airport .
The company already announced one major change it will make to the existing resort. Thayer will drop the Westin affiliation and rename the hotel the Diplomat Resort & Spa, under the Hilton brand Curio.
That decision had Berger Singerman partner Marc Shuster, who represents numerous South Florida hotel buyers and sellers, scratching his head. The Hilton brand was launched only three months ago and is relatively unproven.
“I don’t know if Curio is smart,” said Shuster, who noted that Westin is a “Kingpin” brand in the hotel sector. The attorney wouldn’t rule out the viability of the new brand, however.
The profitability of any hotel investment comes down to the group behind it, according to Trusty.
“The value in hospitality real estate is created by those who run it,” Trusty said.