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CMA
October 26, 2018  

Dell's Shop Eyes Loan for Hotel Acquisition

MSD Capital is looking to line up a roughly $425 million mortgage on a high-end Miami Beach hotel it has agreed to buy from a Starwood Capital partnership.

The investment shop, headed by billionaire Michael Dell, will pay around $600 million, or $1.4 million/room, for the 426-room property, called 1 Hotel South Beach. It’s shopping the loan assignment via broker Hodges Ward Elliott, which is also advising the Starwood group on the sale.

New York-based MSD prefers a floating-rate loan with a term of 5-7 years. A portion of the financing could be structured as mezzanine debt.

The hotel reopened in 2015 after being redeveloped by Starwood, an investment shop in Greenwich, Conn., and its partners, Ashkenazy Acquisition and LeFrak Organization, both of New York.

The property is part of an oceanfront complex that also includes some 160 separately owned residential condominiums. The site, at 2341 Collins Avenue, previously housed the Art Deco-style Roney Plaza hotel, which opened in 1926. It was torn down in 1968 and replaced with an apartment complex that was later converted into a 593-room hotel. After a 2005-2007 renovation, the property became the Gansevoort Hotel and condominium complex.

Sales of the condo units slowed after the recession hit, and lender Credit Suisse seized the property after the then-owner, William Achenbaum’s Gansevoort Hotel Group of New York, defaulted on an $89 million mezzanine loan.

The Starwood partnership bought the complex in 2012 for $230 million. After continuing to operate the hotel for a short time, it undertook the complex’s gut redevelopment and reconfiguration. The Miami Herald reported the redevelopment lifted the partnership’s total investment to nearly $500 million, including the cost of buying out the existing condo units.

The Starwood team then lined up a $250 million mortgage from Deutsche Bank to take out construction financing, according to Real Capital Analytics. Deutsche this year refinanced the loan, increasing its size to $315 million, according to the data firm.

The 1 Hotel brand is billed as Starwood’s “eco-friendly” lifestyle chain. There are currently two others, in Brooklyn and Manhattan, and several more in development. Amenities at the South Beach property include 136,000 square feet of meeting and event space, a private beach, multiple restaurants and bars, four pools, a spa and a fitness center.