Restoring Coconut Groves Grand Bay To Luxury Status Would Be Challenge
Written by Yudislaidy Fernandez on February 11, 2010
By Yudislaidy Fernandez
The future of a former top luxury hotel is uncertain as the owner and Spanish lenders battle in court. But bringing the famed Coconut Grove hotel to its grandeur — or near it — will be a challenge, an analyst says, as more competitors and rooms to fill contend in today’s weaker hospitality industry.
Formerly known as the Wyndham Grand Bay Hotel, the 177-room hotel has been closed more than a year now.
In its latest chapter, owner Merco Group, led by Homero Meruelo, is going to trial in early April to enforce a settlement agreement pending with the Spanish lender, said Tony Castro, Merco’s chief financial officer. Owners ran into financial trouble and stopped paying a $38.7 million loan backed by the property at 2669 S. Bayshore Drive.
Mr. Meruelo is also "proceeding with a different litigation path," Mr. Castro said. "We are developing a lender liability claim because we are of the opinion this should have been resolved as of mid last year, but we seem to be the solitary party in this transaction that feels this way."
To avoid foreclosure, Mr. Meruelo tried to give the property to lender Caja de Ahorros the Galicia, but days before finalizing the deal the bank backed out, saying the developer violated the agreement after attempting to remove used development rights from the hotel. The lender has said it’s seeking the property and Mr. Meruelo’s personal assets as payment.
Merco Group became delinquent on the $38.7 million loan and stopped making mortgage payments in March of last year.
Calls to attorney Gary Carman, who represents the Spanish lender, were not returned.
In the upcoming trial, Mr. Castro says Mr. Meruelo wants to resolve the matter and have the court enforce the original settlement, which has been kept confidential. Mr. Meruelo also faces foreclosure on real estate projects in Aventura and West Palm Beach.
Depending on the court’s decision on whether Mr. Meruelo, a third party or the bank will step in to take over the property, Mr. Castro says, the ultimate goal is to renovate it and "bring it to its original grandeur status. But that is something the court will have to decide."
But resurrecting the once five-star hotel could take years and significant investment because Miami’s hotel scene has changed in recent years, says Scott Brush, an independent hotel consultant.
"The likelihood of it trying to be a four-, five-star hotel is hard. It would cost a lot of money to bring that property to a four-star hotel status," Mr. Brush said. "It depends on the owner, what they want to do, how they view their cost of being in the property."
Because the hotel has been closed, Mr. Brush explained, owners would also have to be aware of potential structural, plumbing and electrical problems that could rise and need to be fixed, increasing renovation costs.
In its glory days, the high-end Grand Bay offered top-of-the-line amenities. It housed a restaurant where many business deals were cut and Regine’s nightclub that attracted visiting celebrities and Miami’s elite.
"I remember when the Grand Bay was the only hotel outside of Miami Beach. It had great food and beverages," said Mr. Brush, founder of Brush & Co., a Miami-Dade-based hospitality consulting firm.
The hotel has been known as Coconut Grove Hotel the past two years, after owners in 2008 lost rights to the Grand Bay name.
Today, with the Ritz-Carlton Coconut Grove and the completion of luxury hotels in nearby Brickell, there’s added competition in the area, Mr. Brush said.
The 162-room Viceroy Miami, 485 Brickell Ave., at the Icon Brickell property opened its doors last year. So did the nearby 411-room EPIC Hotel, at 270 Biscayne Blvd Way. And across the street from the EPIC, Met 2’s boutique, 44-room Hotel Beaux Arts Miami and JW Marriott Marquis Miami, with 313 guestrooms, are both under construction and slated to open in July.
And in the Grove, where the hotel sits, existing hotels have been hurt by a slowdown in tourism and competition from hotels in Brickell, Miami Beach and Coral Gables.
Making the property over into an upscale hotel such as a Hilton Garden Inn, Homewood Suites, Hyatt Place or Hotel Indigo could be successful, Mr. Brush says. But transforming it into a luxury hotel once again would cost a lot, he said. An economy-type hotel would probably not be the best use for a property with a lot more potential, he added, plus the Grove already has several economy hotels.
Overall, changes in the economic climate and local hotel business make a revival of the original Grand Bay unlikely.
The hotel still has a beautiful view, Mr. Brush said, but now more and newer hotel options sit close by.
Plus, he said, "Coconut Grove doesn’t have the cache it had back then. It’s not exclusive anymore…"