Fontainebleau Miami Beach’s $1B loan enters special servicing

South Florida hotels face $4 billion of CMBS debt

Miami /
Apr.April 21, 2020 05:45 PM
Jeffrey Soffer and Fontainebleau Miami Beach

Jeffrey Soffer and Fontainebleau Miami Beach

UPDATED, April 21, 11:22 p.m.: The $975 million commercial mortgage-backed securities loan for Jeffrey Soffer’s Fontainebleau Miami Beach has entered special servicing, presenting new challenges for Miami-Dade County’s largest resort.

The CMBS loan is backed by 846 hotel rooms at 4441 Collins Avenue. It went into special servicing on March 30, according to data provider Trepp.

Brett Mufson, president of Fontainebleau Development, said the hotel is in talks with its lenders, bond holders and servicers regarding modifying the hotel’s loan documents. The special servicer status “by no means should be interpreted as our loan being in default or that we are behind on any payment,” he wrote in an email to The Real Deal.

“As a matter of procedure, upon receiving a Borrower request for a modification the Master Servicer transfers the loan to the Special Servicer who will run point on those discussions,” Mufson said, later adding that, “We view all our lenders as partners and now more than ever it’s important to work hand-in-hand to ensure a smooth transition back to normalcy.”

The loan, originated in November, is the largest CMBS hotel loan in South Florida, according to Trepp.

Commercial Real Estate Direct first reported the news.

CMBS loans are secured by a mortgage on a commercial real estate property. The loan is accumulated into a pool of loans and sold as bonds to investors. When the borrower misses a payment, CMBS loans are taken over by a third-party firm known as a “special servicer,” that can then end up operating the property or reworking the deal with borrowers.

CMBS loans are often deemed riskier than conventional loans because of the difficulty in modifying them due to obligations that the borrower has with bondholders.

When loans go to special servicing, modifications can take a long-time, according to industry experts. During this time, borrowers cannot take on new debt or refinance their property to take cash out of the property.

South Florida’s hotel industry has to meet $4.2 billion in CMBS payments, according to Trepp.

For weeks, South Florida’s hotels have been suffering from the impact of coronavirus. Miami-Dade County and the city of Miami Beach ordered all hotels, motels and short-term rentals shut down effective March 23. Since then, hotels have laid off thousands of employees.

On Tuesday, Visit Florida President and CEO Dana Young said on a conference call with members of the state’s re-opening task force that statewide hotel revenue was down more than $1.6 billion between March 1 and April 11 compared to the same period last year.

The Soffer family-led Turnberry Associates paid $325 million for the Fontainebleau Miami Beach in 2005 and paid another $15 million for a nearby lot where an expansion is planned. Turnberry then spent $650 million gutting and renovating the 1954 historic hotel.

In March 2019, after 25 years of working alongside his sister and Turnberry Associates co-CEO Jackie Soffer, Jeffrey Soffer split from Turnberry Associates to form Fontainebleau Development. In addition to the Fontainebleau Miami Beach, his company also owns JW Marriott Turnberry Miami, Turnberry Isle Marina, Turnberry Ocean Club and The Big Easy Casino in Hallandale Beach.

Designed by architect Morris Lapidus, the Fontainebleau Miami Beach spans more than 15 acres with 11 pools, a 40,000-square-foot spa, and 12 food and beverage venues. The hotel is made up of four towers: the Chateau and Versailles buildings with 846 hotel rooms and the Tresor and Sorrento buildings with 748 condo-hotel units.

Correction: An earlier version of this story incorrectly stated why the loan is in special servicing based on incorrect information from Trepp.


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