South Beach Sizzling Market For Hotel Buys
Written by Patricia Hoyos on November 10, 2011
By Patricia Hoyos
As the operating fundamentals of the hotel industry are on the rise, interest in buying Miami area hotels is also mounting, with investors looking at South Beach properties in particular.
"There was a huge uptick in hotels," said Suzanne Amaducci-Adams, partner at Bilzin Sumberg law firm, "a 200% increase the first two quarters."
She said the third quarter this year was a little slower, but that hotel sales are undoubtedly better positioned than a year or two ago.
"What you have to understand with the hotel market is it responds almost instantly to the economy," Ms. Amaducci-Adams said. "Because hotel rooms are sold by the night, their rates fluctuate depending on the economy."
Investors are always interested in buying hotels in Miami, said Boaz Ashbel, managing director for the Aztec Group Inc., but the challenge is matching the expectations of the sellers and buyers. Few sources are prepared to lend to hotel investors, he said, and the amount of equity needed for this sort of transaction is rather large.
So far this year, he said, his firm has tracked 11 hotel sales, representing 1,676 rooms, in Miami-Dade County. The combine sale price in those transactions was about $345 million, with transactions ranging from $5 million to $130 million.
Seven of the 11 hotel sales were properties in Miami Beach, with a sale volume of about $255 million, 74% of the overall volume. The remaining four were in the downtown/Brickell area and Coconut Grove.
"In the financing front, we are aware of only a handful of new loans that were consummated this year," he said. "Overall, the volume was very small, less than $20 million."
Experts agree that operating fundamentals of the hotel industry directly impact hotel sales.
In the past summer, average Miami-Dade hotel occupancy rose 11.2% from the prior year, according to Smith Travel Research. Miami’s room rate also rose 3.6% and revenue rose 19.2% from last year. In a year-to-date basis, Miami ranks No. 4 nationally in occupancy and No. 3 in room rate and revenue in comparison.
"The fundamentals of our industry are peaking," said Stephen Taylor, vice president of Hunter Realty. "They are coming back to 2007 levels."
Ms. Amaducci-Adams said a mix of type of hotel properties is coming into the market, from small, independent ones to large ones like the Royal Palm Hotel, which was sold this year. The Royal Palm was sold last year during foreclosure and this year was sold again, but for a profit.
Guy Trusty, president of Lodging & Hospitality Realty Advisors, said the industry is in a strange place: many distressed transactions are coming onto the market at the same time developers are looking to create new hotels.
Most of the existing hotels for sale on the market, he said, have been distressed properties.
Distressed properties or not, both US and international investors have their eyes set on the Miami hotel industry.
"Miami is a very hot market for a lot of investors from Latin America," Mr. Taylor said. "But there might be a big gap between what the buyers are willing to pay and the sellers are willing to sell."
Mr. Ashbel said a fair share of foreign investors look at hotels in Miami. The Continental Oceanfront Hotel, which was sold this year, was mainly a European investment, he said.
Other than South Beach, Mr. Ashbel said, Brickell and the airport area are also desirable spots.
Said Ms. Amaducci-Adams, "Every major brand is desperate to have a hotel in South Beach."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.