The former Lord Tarleton Hotel in Miami Beach could be going back to its roots.
A San Francisco company has paid $85 million for the former hotel property, which has operated as a luxury rental apartment community called The Crown Miami Beach for five years. Crown Miami Hotel Owner LLC bought the three-property site at 4041 Collins Ave., according to Miami-Dade County records. The county electronically recorded the Nov. 27 transaction Monday.
The buyer’s name suggests The Crown will be repositioned as a hotel in an area of Miami Beach that is rife with all kinds of hospitality product. Crown Miami is managed by Geolo Capital, which obtained a $125 million loan from Irving, Texas-based GSREMP Origination Joint Holding L.P.
Geolo is an entity of Chicago’s Pritzker family, whose holdings include the Hyatt hotel chain, according to the company’s website. The company specializes in “investing in and creating a portfolio of consumer-focused companies” involved in the hospitality, entertainment, health and wellness and consumer products sectors.
Calls to Geolo managing general partner Tom Gottlieb were not returned by deadline.
Bay Harbor Islands-based Crown at Miami Beach Ltd. is the seller. The company is managed by Howard Cohen, president and CEO of Atlantic & Pacific Development Group Inc. Cohen did not return calls seeking comment.
Conversion To Rentals
The property was built in 1940 as the Lord Tarleton Hotel, and Melvin Grossman expanded the Art Deco hotel building during the 1950s.
Atlantic & Pacific added a luxury rental tower in 2007.
During the condominium conversion craze in the middle of last decade, the hotel’s owners sought to convert the property from a hotel to residential use. But instead of a condo, the owners opted to convert to a pure rental community.
In addition to the 172-unit apartment building, The Crown site includes a 1.5-acre vacant parcel and a 76,355-square-foot mixed-use building. Morton’s The Steakhouse previously operated a restaurant at the complex, but the restaurant closed earlier this year.
As a luxury rental property, The Crown has performed “exceptionally well,” according to multifamily specialist Robert Given, vice chairman at real estate firm CBRE. He was not involved in the transaction.
“This is one of the very few options on the barrier islands, the only option I know of with a walk-on/walk-off to the beach,” Given said. “Most of the apartments [in the area] are achieving rents in the $2.50-a-square-foot range, while Crown was achieving in the $3-a-foot range. That is quite exceptional for a rental basis.”
If Geolo indeed plans to convert The Crown back to a hotel, it would be a case of trading an already profitable model for an even more profitable one, Given said.
“It’s like taking a strong-performing Vegas casino and razing it to build a bigger one,” he said.
The existing apartment community can provide short-term cash flow while the new owners prepare a long-term strategy for the hotel.
“There is an exceptionally strong surge of interest on the leisure front to get back into the hotel business,” he said. “South Florida has been such a strong performer the last couple of years. The options to get into a beachfront hotel are fairly rare.”
The city’s Collins Waterfront Historic District zoning allows both residential and hotel uses, so Geolo should be able to easily reposition the site as a hotel if it so chooses, according to Miami attorney Alexander Tachmes, a partner at Shutts & Bowen who represents numerous hotel owners and management companies. Tachmes represents the nearby Courtyard Miami Beach Oceanfront, which was previously known as the Cadillac Hotel.
“They could essentially convert the apartments they have now with no requirement to increase the square footage,” Tachmes said. “Or they might try to subdivide the square footage and probably increase the unit count.”
Top Multifamily Deal
If considered a multifamily transaction, The Crown sale would be South Florida’s most expensive in 2012.
The sale easily surpasses the region’s next priciest deal: the $64.7 million sale of the Winner’s Circle Apartments in Parkland on Aug. 2. There were several multifamily trades between $40 million and $60 million in Broward and Palm Beach counties.
Miami-Dade County’s next most expensive apartment complex deal was the $52.25 million transfer of Residences at Merrick Park in Coral Gables. In that deal, TIAA-CREF took title to the complex Aug. 1 by assuming the sublease for the underlying land and ownership of the 120-unit apartment complex.
In the hotel sector, expensive sales have been rare this year despite the strong performance of South Florida hotels and surging demand from investors, particularly for properties in Miami Beach.
The $100 million sale of the former Gansevoort Hotel in Miami Beach, which included a $200 million mortgage assumption, led the market. Starwood Capital Group, the LeFrak Organization and Invesco plan to reposition the hotel as The Perry South Beach.
Other hotels near The Crown site include the Courtyard property, Fontainebleau Miami Beach and the Eden Roc Renaissance Miami Beach.
The success of the South Beach hospitality market is driving activity further north on Collins Avenue, as evidenced by the Crown transaction, according to Tachmes.
“The hotel market in South Beach is very dense right now,” he said. “There are high prices and obviously a lack of available land. We have started to see a move north; that’s a natural progression.”