The dramatic transformation of Surfside’s private Surf Club into a luxury condominium-hotel complex is set to begin.
SC Property Acquisition LLC, a Miami company led by Turkish conglomerate Koc Group, Thursday closed on its $116 million purchase of an ownership stake in the club, according to Miami attorney Robert Zarco, the club’s general counsel. The Koc-led company can now move forward with a renovation of the historic clubhouse and build a 285-unit condo-hotel project.
Voting members of the club approved the transaction in September. Surfside commissioners in October approved the project.
“The club and its proprietors are extremely excited to have been able to engage in a successful transaction with this particular buyer, where they will be able to work together and remain as lifetime social members in the expansion and growth of the future Surf Club,” Zarco said in a phone interview Thursday.
The transaction was structured as a “reverse merger,” in which the proprietor members exchanged their ownership interest for a financial consideration, according to Zarco. In this instance, the financial consideration was $116 million.
“This was a very complex commercial real estate transaction, which was complicated by the fact that you had to balance the financial and business requirements with the emotional needs of the proprietary members,” he said.
Koc is Turkey’s largest industrial and services group by revenue, exports and employees. Its shares trade on the Istanbul Stock Exchange, according to the company’s website. The Surf Club investment is Koc’s first foray into South Florida.
SC Property plans to construct three 12-story buildings on the east side of the 9011 Collins Ave. site and two four-story buildings on the west side. In addition to the 285 condo-hotel units, the project includes a gourmet food store, a four-star hotel and spa and 661 parking spaces.
The Surf Club site currently has a 109,325-square-foot facility on 4.56 acres, a 0.87-acre parcel with tennis courts and a 0.87-acre parking lot. The main facility includes 25 “oversized rooms and suites” for club members and guests, according to the club’s website.
The new owners potentially could have pushed for a denser project, but the current plans should allow them to tap into “the highest end of the market,” according to Robert Kaplan, principal at Miami Beach-based Ackman-Ziff Real Estate Group. Kaplan was not involved in the transaction.
The condo-hotel sector suffered during the real estate collapse, but the concept has shifted toward permanent residences with hotel amenities, Kaplan said. That has helped some recent Miami-Dade County projects succeed.
“It appears they are following the model of other projects in the market, which tend to earn the highest price per foot in their submarkets,” he said. “Acqualina leads the market in Sunny Isles Beach. St. Regis leads the market in Bal Harbour. Canyon Ranch leads the market in North Beach.”
Earlier this year, the Surf Club received a series of unsolicited offers from investors looking to acquire the club and its valuable underlying real estate. The club has 100 to 150 proprietor members. As long as they are active members in good standing, they retain voting rights.
In operation since 1930, the Surf Club has hosted celebrities and dignitaries ranging from the Duke and Duchess of Windsor and U.S. Army Gen. Douglas MacArthur to singers Tony Bennett and Julio Iglesias.
The club is rented out for charity and business functions and wedding receptions. Membership fees range from $3,500 annually for junior members to a $200,000 initiation fee and $10,000 annual dues for proprietor membership.
Expensive real estate sales have been rare in South Florida this year. The few exceptions usually have involved oceanfront land.
Consultatio, the development firm of prominent Argentine businessman Eduardo Constantini, in June paid $220 million for the 5.53-acre home of the Bal Harbour Beach Club. The purchase was Miami-Dade County’s most expensive land deal since an affiliate of Malaysia-based Genting Group paid $236 million for the downtown Miami headquarters of The Miami Herald in May 2011.
Like the Koc-led group, Consultatio had to outbid several other investors who also made unsolicited bids to the beach club for the property.
In nearby Sunny Isles Beach, a company managed by Fortune International Realty paid $22 million for two adjacent, undeveloped residential parcels at 16901 Collins Ave. Another prominent developer, Gil Dezer, made several strategic land purchases in Sunny Isles Beach this year.
Resurgent condo prices are supporting the premiums developers are paying for raw land, Kaplan said.
And “construction costs are at a moderate” level, he said. “There is room to go up, but it won’t go up until the contractors, subcontractors and suppliers are all stressed.”