Hot for hotels
Institutional investors and tourists are invading the South Florida hotel market – and for some of them, it’s more than a short-term stay.
Among the signs of the region’s comeback since the recession is the demand for high-end hospitality. Miami ranks as one of the top hotel destinations in the U.S. in terms of revenue per available room and has an occupancy rate of more than 80 percent, according to Tennessee-based Smith Travel Research.
“Miami is a global gateway city,” said Guy Trusty, president of Coral Gables investment advisory firm Lodging & Hospitality Realty. “Very few cities have reverted once they attained that status.”
Opportunities to build ground-up hotel projects are increasingly scarce, so developers are repositioning older properties where possible. In Miami Beach alone, there are gut-level renovations underway at the iconic Shore Club hotel, the new Edition hotel and condo at the site of the old Seville Hotel, and the Metropolitan by COMO at the site of the shuttered Traymore Hotel.
“Wherever there’s an opportunity to expand a footprint in the marketplace, there is a move to do that,” said Carter McDowell, partner at Miami-based law firm Bilzin Sumberg.
McDowell, whose firm represents developers including the Chetrit Group, Turnberry Associates and Invesco Real Estate in South Florida, said boutique hotel properties have been selling for more than $1 million per room in the past 12 months.
More and more, Trusty said, hotel guests in South Florida are willing to spend $1,000 per night — and gains for owners are expected to continue. In Broward and Palm Beach counties, average hotel occupancy surged to 74.7 percent and 71.6 percent, respectively, in 2013, according to Smith Travel Research.
Prices are rising, but that hasn’t deterred players from jumping into the game.
The largest hotel deal recently was Al Rayyan Tourism Development Company’s acquisition of the St. Regis Bal Harbour Resort. The Qatar-based firm bought it from Related and Starwood Resorts & Hotels for $213 million. Starwood is staying on as property manager of the 27-story, 200-room resort.
On the financing front, while Turnberry CEO Jeffrey Soffer fights an unrelated $100 million wrongful death lawsuit, he and his partners completed a $535 million refinancing on the 1,600-room Fontainebleau Miami Beach resort.
Meanwhile, the Related Group paid $104 million for a waterfront Brickell Avenue site, with plans to build a five-star, 200-room hotel as part of the One Brickell mixed-use development.
Trusty considers the SLS Brickell condominium and hotel a key sign that condo-hotel projects are no longer a risky investment. The 450-unit, $300 million venture between the Related Group and the Los Angeles hotelier sbe is slated to open in 2016.
Invesco, Starwood Capital and LeFrak Organization are also scheduled to open the $100 million 1 Hotel & Homes South Beach in the fall, launching a new hotel brand. The 161-condo-unit, 406-hotel-room resort will rise on the site of the former Gansevoort and Perry hotels. “Because rates are high enough,” Trusty said, “we’re back at a point where condo-hotels are making sense again.”