Mezz lender forecloses on Ocean Drive hotel in South Beach

Owner Henley faced $37M in unpaid debt

Miami /
Oct.October 20, 2020 05:30 PM
Lord Balfour Hotel

Lord Balfour Hotel

The pandemic brought especially bad timing for the owner of a South Beach hotel, which purchased it last year, embarked on a multimillion-dollar renovation, and ended up losing its investment.

Leste Group and its partner, Moto Capital Group, last month foreclosed on the newly renovated Lord Balfour Hotel on Ocean Drive, The Real Deal has learned.

The mezzanine lenders completed an out-of-court UCC foreclosure of the 81-key hotel at 350 Ocean Drive, according to sources. Senior lender Värde Partners had an intercreditor agreement with Leste and Moto Capital, which held the mezzanine loan and assumed all obligations related to the property, and now control it.

Hotel borrowers nationwide are facing the threat of foreclosure by their senior lenders, as well as UCC foreclosures from mezzanine lenders, the latter of which are often faster.

In August of last year, the U.S. arm of Henley, a United Kingdom-based private equity firm, paid nearly $35 million for the Lord Balfour. Slated to become a Life House property, it marked the fourth deal for Henley and Life House.

At the time, Henley said it would invest more than another $5 million into the hotel for renovations. Henley completed renovating all the rooms, suites and common areas of the hotel, which was built in 1940. It was under renovation even prior to the pandemic, and remains closed.

The property’s unpaid debt totaled about $37 million, including Värde’s loan and the mezzanine debt, according to sources.

Leste, an alternative asset manager based in Brazil, and Miami-based investment management firm Moto Capital are considering multiple options for the property, the sources said.

Life House said in a statement that it looks forward to working with the future owner to open as a Life House “in good time.” A spokesperson said Life House is “excited to open the beautiful, contextual and landmark hotel,” but that it understands “the economic hardships faced by owners across the world during these unprecedented times,” according to a statement.

Henley did not respond to a request for comment.

More UCC foreclosures are expected in South Florida as some hotel owners opt to walk away from whatever equity they have in their properties. Experts say many highly leveraged borrowers are at a crossroads, deciding among selling at a discount, throwing the keys back to their lenders, or buying more time from lenders.

Without a federal bailout, an estimated 38,000 U.S. hotels could close permanently, while another 28,000 are at risk of being foreclosed on, according to the American Hotel & Lodging Association.

Last month, the Luxe Rodeo Drive Hotel in Beverly Hills closed for good, after having embarked on a full renovation just before Covid hit.






    Related Articles

    arrow_forward_ios
    Ken Griffin and lots on Star Island Drive (Citadel, Google Maps)

    Ken Griffin adds to Star Island assemblage with $25M purchase: sources

    Ken Griffin adds to Star Island assemblage with $25M purchase: sources
    Diego Colmenero and Charlie Porchetto from Urbanica plan to break ground on Edgewater hotel (Urbanica)

    Urbanica completes $9M assemblage for Edgewater hotel

    Urbanica completes $9M assemblage for Edgewater hotel
    Rendering of the project

    Fort Lauderdale OKs plan for Bahia Cabana Hotel on the beach

    Fort Lauderdale OKs plan for Bahia Cabana Hotel on the beach
    Bulgari CEO Jean-Christophe Babin and 100 21st Street, Miami (Bvlgari via Twitter, Getty, iStock)

    Bulgari plans first US hotel on oceanfront Miami Beach site

    Bulgari plans first US hotel on oceanfront Miami Beach site
    HFZ looks to sell Shore Club South Beach hotel

    HFZ looks to sell Shore Club South Beach hotel

    HFZ looks to sell Shore Club South Beach hotel
    Jerry Bruckheimer and his penthouse (Getty, Douglas Elliman)

    Jerry Bruckheimer lists Miami Beach penthouse for $17M

    Jerry Bruckheimer lists Miami Beach penthouse for $17M
    James Curnin and 416 West San Marino Drive (Getty, Google Maps)

    Spec home builder James Curnin buys Venetian Islands teardown

    Spec home builder James Curnin buys Venetian Islands teardown
    (Google Maps)

    Condo sales plunge in Miami-Dade during Thanksgiving week

    Condo sales plunge in Miami-Dade during Thanksgiving week
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...