🏨 The Hotel Hesitation

There's a lull in lodging deals; Plus: a private-island condo loan

The winter holidays are behind us and most vacation revelers are back at their desks. So what better time then to talk about hotels?

Investors have scaled back on buying hotel properties in South Florida; But also: Hyatt Regency developer is bullish on Miami business travel. And the South Florida lending spree continues for a condo project on a private Miami island.

Let’s get to it!

Checking Out: Investors Took a Pass on South Florida Hotels 

Hotel investors pulled back in a big way from South Florida in 2023. Overall, they bought half the number of lodging properties than they did the previous year, and in some places, paid less on average than in 2022.

It’s not that they’re feeling glum about the future of Florida tourism or business travel. But high interest rates made borrowing money expensive. And on top of that, lenders were ever more selective in which hotel deals they financed, according to an analysis by property data firm CoStar.

Also: surging property insurance rates in Florida — the state with the highest premiums in the country — have become a deterrent to investors seeking to own and build in the state, CoStar said. Insurance carriers have taken a more restrictive stance on covering hotels everywhere, as damage from natural disasters becomes more costly.

Anyway, the numbers are stark when you look at what Florida hotel investors bought in 2023, compared to the year before. Here’s some figures from CoStar covering most of 2023 through Dec. 18:

🏨 In Miami-Dade County, sales of hotel properties fell 46% from the previous year, to just 25 deals.

🏨 The total dollar value of all Miami hotel sales was $667.5 million. Compare that to 2022, when it was $1.2 billion.

🏨 Palm Beach County hotel deals plunged 63% to seven transactions for the year. The dollar volume of the sales also fell— by 78% — to just $52.4 million.

🏨 Broward County was a bright spot: In February the 1,000-room Diplomat Beach Resort in Hollywood traded for $835 million, the highest hotel sale price ever in the county, CoStar said.

It was also the biggest hotel deal in all the U.S. since the start of the pandemic.

That hotel sale —only one of 23 in Broward County last year — pumped up the dollar volume of all hospitality deals there to over $1 billion.

The buyers of the Diplomat were: Credit Suisse Asset Management and the Honolulu-based Trinity Real Estate Investments.

The Diplomat Beach Resort in Fort Lauderdale sold for $835 million

Miami’s Office Boom is Bright Spot for Hotels

A new Hyatt Regency for Miami’s downtown (Photo: Gencom and Hyatt)

The strength of Miami’s office market is good news for the area’s hotels.

That’s the view of Alessandro Colantonio, chief investment officer of hospitality developer Gencom. His firm, in partnership with Hyatt Hotels, is planning to build a 615-room Hyatt Regency along Miami’s downtown waterfront.

Construction on the project — part of a larger $1.7 billion redevelopment plan called Miami Riverbridge — won’t begin until 2025. In the meantime, financial, legal and tech firms continue to migrate to the city, laying the groundwork for robust corporate demand, he said.

“We think Miami is geared up to become a major financial epicenter over the next five-to-ten plus years,” Colantonio said in an interview. “The more catalysts that can bring people to Miami permanently, to work on assignment, or as tourists - that’s going to fuel the hotel side.”

Leisure travelers didn’t come to Miami last year in the same numbers they had during the pandemic, leading to a softening of hotel rates. But business travel, including conferences, was stronger in 2023, Colantonio said.

The planned Hyatt Regency, at 400 SE 2nd Avenue, will also include 264 Hyatt-branded apartments — aimed at future business travelers needing longer term stays — and 200,000 square feet of meeting space.

The Riverbridge project also calls for 1,500 new rental apartments, a nod to potential demand by employees to live near work.

Holler if You Got a Loan Last Week!

Vita at Grove Isle in Miami’s Coconut Grove (Photo: CMC Group)

The final weeks of December marked a financing bonanza for South Florida development projects, as lenders closed out the year with sizable commitments to local condo and office projects.

Here’s another one: Vita at Grove Isle, an “ultra-luxe” condo development on a 20-acre private island in Miami’s Coconut Grove neighborhood, got a $239 million construction loan on December 29.

The loan was from Bank OZK, the Arkansas lender that really, truly loves Florida real estate these days. Last month, the bank committed $220 million to Fort Lauderdale’s FAT Village office and apartment project, and $259 million to a beachfront condo tower in Pompano Beach, where 90% of the unbuilt units have already been sold.

Pulling out the calculator, that’s over $700 million of investment love from Bank OZK to South Florida in just December.

Anyway, about that island project: Vita at Grove Isle will be a seven-story condominium with 65 waterfront residences— all with private elevators— where prices start at $5.7 million. The offerings include 12 penthouses, each with their own rooftop pools. Those start at $19.5 million.

More than 70% of the not-yet-built units have already been sold, according to a statement by the developer CMC Group, led by veteran Miami builder Ugo Colombo.

Most of the buyers are from the United States, a big change from previous Miami condo boom eras, which relied overwhelmingly on interest from Latin American buyers.

The project, which broke ground last April, is expected to be complete at the end of 2025, according to CMC.

Vita at Grove Isle condo project (Photo: CMC Group)

That’s it for today!

Like what you’re reading? Send Highest & Best directly to your inbox by subscribing here: https://highest-and-best.beehiiv.com/subscribe

Join the conversation

or to participate.