The owner of a Holiday Inn in downtown Miami filed for Chapter 11 bankruptcy protection, with a plan aimed at luring investors to redevelop the site.
With its close proximity to PortMiami, Bayside Marketplace and the planned Waldorf Astoria Miami luxury tower, the hotel owner’s attorney Linda Worton Jackson said the 10-story building at 340 Biscayne Boulevard is attracting interest from potential investors. The property could be redeveloped as a mixed-use project with a hotel component.
“The site is primed for development,” Worton Jackson said. “It’s in a fabulous location with a lot of investors eyeing it with a view toward redevelopment.”
The hotel is owned by the entity 340 Biscayne Owner LLC that is tied to Brazilian developer Gilberto Bomeny. The same company sold the land underneath the Holiday Inn to Kawa Capital Management in 2016 in a leaseback deal. The site consists of three contiguous parcels with a combined area of 39,982 square feet, which has been occupied since 1950 by a 200-room hotel currently under the management of Holiday Inn.
On Monday, the owner filed its petition in Miami’s federal bankruptcy court, listing between $100 million to $500 million in assets, and liabilities between $10 million and $50 million. According to the list of the hotel’s 20 largest creditors, the main creditor is 340 Biscayne Lendco, which has a secured claim of about $37 million. First Bank of Puerto Rico has the largest unsecured claim for a PPP loan of $989,219.
Worton Jackson said her client expects to refinance the $37 million loan, keep post-petition debts and pay all creditors in full. By filing for Chapter 11 bankruptcy, the Holiday Inn owner will be able to restructure the existing loans and bring in new equity to improve operations, Worton Jackson said. Day-to-day operations will not be affected, she added.
The 200-room Holiday Inn relied heavily on cruise ship passengers sailing out of PortMiami, Worton Jackson said. They represented 70 percent of the hotel’s Thursday, Friday, Saturday and Sunday bookings, prior to the pandemic, according to a company press release. In 2019, more than one-third of the hotel’s reservations originated from contractual agreements related to the cruise industry.
The hotel, which also has 2,000 square feet of meeting space and onsite dining, operated regularly at 90-plus percent occupancy and had more than $10 million in annual operating revenue, the press release states. Business took a dive when its operations were limited due to emergency orders issued by local governments to curtail the spread of coronavirus. In April of last year, the Holiday Inn temporarily laid off 73 people, according to a WARN notice filed with the state.
“During the pandemic, there were many days that the hotel operated in the single digits,” Worton Jackson said. “They kept it open for essential workers, including airline crews. Virtually all the employees [who were laid off] have been hired back.”
According to the press release, the Holiday Inn’s occupancy picked up significantly in January to an average of 80 percent, and it’s first quarter performance exceeded hospitality industry forecasts. As a result, the Holiday Inn owner broke even on its hotel operations while remaining current on virtually all of its obligations. Once the cruise industry rebounds, the hotel expects to regain profitability, the press release states.
Rich Lillis, Collier International’s executive managing director for hotels in the U.S., said the leisure segment is driving a resurgence in the hospitality sector. Lillis said occupancy in Miami-Dade was 72 percent in the second quarter, compared to 76 percent in the same period of 2019. But the average daily room rate improved by 26 percent, he said.
“Investors are clamoring for Miami,” Lillis said. “I believe we will see a significant amount of transactions with new capital being invested into the Miami market.”