California investment firm buys Key Largo Hilton from Blackstone

KHP Capital Partners, a California investment manager, just bought the newly renovated Hilton Key Largo from New York’s Blackstone Group.

The deal includes a little over 13 acres of waterfront land at 97000 South Overseas Highway, plus the 200-room hotel and its marina with 21 boat slips, according to a news release from brokerage HFF. The firm declined to disclose the price.

It was last sold to the MeriStar Hospitality Corp. in 2003 for $23.5 million, according to Monroe County property records. Three years later, Blackstone acquired the Hilton Key Largo and nine other hotels from MeriStar in a deal valued at $367 million. The financial giant later bought MeriStar, a real estate investment trust, for $2.6 billion.

Shortly after its purchase, Blackstone began a $12 million renovation for the Hilton Key Largo, including upgrades to the rooms and common areas. The property also has 18,000 square feet of event space plus a new restaurant, the Treetops Bar & Grille.

HFF had marketed the hotel and two others in Florida on behalf of Blackstone in 2013, but a spokesperson for the brokerage firm told The Real Deal this deal was for the Hilton Key Largo alone.

According to a 2013 report in CRE News, Blackstone was hoping to fetch a minimum of $219,300 per room for the three hotels. Though its unclear what KHP actually paid for the property, the Hilton Key Largo would have sold for nearly $44 million based on that price.

KHP is a private equity firm that manages real estate investments on behalf of its partners and principals. According to its website, the company’s focus is on independent and boutique hotels. Its most recent investment fund launched in 2015 is sized at $210 million.

Daniel C. Peek, Max Comess and Alexandra Lalos of HFF represented Blackstone for the sale.

“Key Largo in particular seems to be emerging as a new high-end resort destination in South Florida,” Comess said in the release. “The same transformation and flight to quality that occurred in Key West and Islamorada in recent years appears to be happening in Key Largo, the closest of the Florida Keys to Miami.”

Recent years have seen renewed interest in the Florida Keys from hotel developers, who are opening new hotels and renovating older properties. As The Real Deal reported in November, more than 1,600 rooms are slated to come online in the Keys by the end of 2016.

“The Keys have been and continue to be a prime destination for visitors,” Pritam Singh, a prominent Keys developer who’s building the Knight’s Key Resort & Marina, told TRD at the time. “What we are really doing is building back our inventory that we lost.” — Sean Stewart-Muniz