ALM Properties, Inc.
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Chetrit Group spends $117 million to buy Miami Beach ResortJoseph Chetrit's New York investment firm is building a significant Miami Beach hotel portfolio, including buying the 424-room oceanfront hotel from Blackstone Group.
2013-01-30 09:16:27 AM
The pending $117 million acquisition of the Miami Beach Resort by Chetrit Group LLC puts Joseph Chetrit's New York investment firm in a position to be the dominant hotel owner in the city's hospitality market.
Chetrit has an agreement to buy the 424-room oceanfront hotel at 4833 Collins Ave., according to Wednesday's report from Bloomberg News. It plans to renovate the hotel. Blackstone Group LP is selling the resort to help restructure debt in its LXR Luxury Resorts & Hotels division.
The 50-year-old Miami Beach Resort has had several names, most notably the Doral on the Ocean. Founded by the Kaskel family, the Doral was popular with celebrities. The Bloomberg report noted that Frank Sinatra used to perform at the hotel.
A source familiar with the transaction confirmed that the report of a pending sale and future renovations of the hotel is accurate.
Blackstone spokesman Peter Rose declined comment. Calls to Chetrit spokeswoman Kathleen Cudahy were not returned by deadline.
The sale has not been recorded by Miami-Dade County. Once it closes, Chetrit will have assembled at least 14 buildings in Miami Beach over the last two years.
Chetrit co-owns Chicago's Willis Tower (formerly the Sears Tower), 620 Avenue of the Americas in Manhattan and a large chunk of downtown Los Angeles. Earlier this month, Sony Corp. of America announced it had a contract to sell its United States headquarters at 550 Madison Ave. for $1.1 billion to a consortium led by Chetrit.
"Given Chetrit's involvement with landmark properties, his investment into yet another Miami Beach property emphasizes the continuing desirability and importance of Miami Beach hotel assets for investment portfolios," said Daniel Marinberg, a Miami-based shareholder in the real estate practice at Greenberg Traurig. Marinberg was not involved in the Miami Beach Resort transaction.
With the $117 million outlay, Chetrit is set to spend about $276,000 per unit for the Miami Beach Resort. That does not account for renovation costs.
For the city's "overheated" hospitality market, the recent acquisitions by Chetrit signal that Miami Beach still has significant upside, said hospitality consultant Guy Trusty, president of Lodging & Hospitality Realty Inc. in Coral Gables. Trusty was not involved in the Miami Beach Resort sale.
"Those guys are not extravagant spenders, they are very astute buyers," Trusty said. "Miami Beach goes through cycles of either irrational investments or really irrational investments. These guys are making good deals."
Half of the properties Chetrit recently amassed are in a block immediately east of the Miami Beach Convention Center, which is set to be redeveloped once the city chooses between two competing development groups.
Chetrit wants to partially demolish, renovate and restore the two- and three-story buildings to make room for a hotel. The company and its local partner Ari Pearl plan to make rooftop additions and build a five-story building as part of what will be the Collins Park Hotel. They paid $10.82 million for the block in April 2012.
Late last year, Chetrit received city approval to renovate and expand the Versailles Hotel at 3425 Collins Ave. During the real estate boom of last decade, Versailles' 289 rooms were converted to condominiums. Chetrit has bought back more than half of those units.
The company "is getting involved with hotels others wouldn't get involved in," Trusty said. "If you have 200 [condo owners] you have to deal with, not many investors have the patience for that."
Chetrit also owns the Tides Hotel at 1220 Ocean Drive, which it acquired for $20 million in 2011. It purchased the parking lot, office building and retail property behind the Tides and plans to redevelop them into a boutique hotel. And, the company owns the Fairwinds Hotel, which is set to be restored and expanded.
The section of Collins Avenue where the Miami Beach Resort is located has had a resurgence of investment as South Beach reaches a saturation point for investment activity, according to Marinberg, the Greenberg Traurig shareholder.
"It is so difficult to find good assets in Miami Beach as viable hotel options," he said. "There is really not that much more of an opportunity, even in Mid-Beach and North Beach, with a limited amount of space for new construction."