Suzanne Amaducci-Adams Unravels Miami Hotel Market

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MIAMI—Orlando is known as a tourist Mecca, but Miami—and all of South Florida—is seeing major traction in its hotel market. Indeed, South Florida’s hospitality market is sizzling and new hotel deals are making headlines.

GlobeSt.com caught up with Suzanne Amaducci-Adams, a partner at Miami-based Bilzin Sumberg Baena Price & Axelrod LLP, to discuss what’s going on in Miami’s hotel market. She also discusses who the hotel buyers are and where they are coming from.
 
GlobeSt.com: South Florida’s hospitality market certainly seems to be sizzling with a number of hotel deals announced in recent months. What is driving that?

Amaducci-Adams: With its strong ties to international trade and commerce, its  increased sophistication through art, entertainment and culinary excellence, and its position as a  sought after domestic and international tourist destination, it is no surprise that Miami is outperforming national averages and standing out as one of the top investment markets for hospitality in the U.S.  

Hotels are considered to be among the region’s most sought after assets right now as foreign and domestic buyers look for high-performing, quality projects. A report released by Jones Lang LaSalle shows that Miami has been one of the most active hotel investment markets in the country since 2000 with over $3.4 billion in transaction volume. 2011 witnessed the second strongest year in deal volume history, amounting to $557 million in sales—a 154% increase—that year alone.

As a result, we are seeing more hotels change ownership and new hotels come to the market. For example, the  first half of this year we saw the arrival of the $85 million SLS South Beach Hotel and the St. Regis in Bal Harbour,  the refinancing of the Courtyard by Marriott at mid-beach for approximately $60 million and the sale of the Perry Hotel—formerly the Gansevoort—the largest hotel deal thus far this year.  

According to Smith Travel Research, Miami garners among the highest Average Daily Rates  of any U.S. market, ranking fourth among the top-25 markets, surpassed only by New York, Oahu Island and San Francisco in 2011. In February and March of this year Miami was even beating  these formerly untouchable markets.  
 
GlobeSt.com: Where is financing coming from? Are these all cash deals or is financing available for buyers looking to acquire hotel assets?

Amaducci-Adams: Financing is still difficult to come by for highly leveraged owners but there are lenders willing to loan money for the right project and/or right investor. The Fontainebleau Hotel was the largest Miami hotel refinancing so far this year and was recently reported to have had an appraised value of over $700,000 per key at the time of the refinancing.

Community banks in particular are actively lending for hospitality assets that are stable and require low leverage. CMBS originators are back in the market actively seeking  opportunities to provide non- recourse financing for well established hotel properties.  I am currently working on two hotel construction loans in Miami, which is an incredibly positive sign.
 
GlobeSt.com: Who are the buyers and where are they coming from. Are they institutional, international?

Amaducci-Adams: At the end of 2010 and beginning of 2011, buyers were primarily comprised of REITs and private equity firms  that were purchasing high profile properties. These included the $130 million sale of the Royal Palm Hotel in Miami Beach and the $100 million note sale of the Omni Center and Hilton Downtown Miami Hotel.

The recent Gansevoort sale in Miami Beach, since renamed The Perry Hotel, was purchased by a consortium consisting of three major real estate and hospitality players: Starwood Capital Group; the LeFrak Organization and Invesco Ltd.  

While there is still some REIT activity going on, the bulk of the transactions are being made by private investor groups and foreign buyers for cash. The Delano Hotel South Beach was just listed this week and Morgan's is rumored to be asking $1 million per key for the iconic resort. I do not know if it will fetch that high of a price but I do not expect it to stay on the market long, as foreign investors are eager and willing to pay cash for these properties.
 
GlobeSt.com: Are new brands coming to market or are we just seeing a changing of hands among owners?  

Amaducci-Adams: Both. New brands are seeking entry into this market because they recognize the long-term value of doing so. All major brands want to be here if they are not already here and they are actively competing to woo current owners to make a change due to the high barriers to entry in this market.

Earlier this year Kimpton beat out Doubletree for the management of the Surfcomber Hotel  which sits at a prime location at 17th and Collins Avenue. We are also seeing a lot of properties change hands as new buyers come in to take over distressed properties, which are prime opportunities for brands desiring to enter or re-enter the Miami market. New foreign brands are also actively seeking opportunities in Miami.
 
GlobeSt.com: Which submarkets are hottest right now and why?

Amaducci-Adams: While Miami’s hospitality market is strong region-wide, the highest performing submarket is Miami Beach, with the downtown/Brickell area as a close second. Miami Beach is almost fully absorbed and is experiencing one of the strongest RevPAR growth rates of any major submarket in the country.

Downtown Miami’s hospitality boost is largely stemming from its revitalization as an employment only district to a global center for commerce and urban living. According to the Miami DDA, nearly 95% of the 23,000 condo units constructed since 2003 are occupied with primarily full-time residents. This, coupled with its growing commercial base is elevating its status as a hospitality hotspot.
 
GlobeSt.com: How does the success of the hotel market reflect on the health of the larger South Florida economy?

Amaducci-Adams: The U.S. Department of Commerce's International Trade Administration has released tourism data revealing that international visitors spent an estimated $14 billion on travel to, and tourism-related activities within, the United States in April 2012—$1.5 billion or 12 percent, more than was spent in  April 2011.There is a direct correlation between the hotel industries growth and the larger economy.

Passenger arrivals at MIAMI International Airport increased in the first five months of 2012 with international passenger arrivals up 8.9% and domestic arrivals up 6.4% when compared to the same time period last year. Total arrivals increased in the first five months of 2012 by 7.6%. Major national and international  events in Miami such as Art Basel, the Volvo Ocean Race and BCS National championship football game only further drive business.

Bottom line is that the more people that come here and spend money, either through business or through tourism dollars, the more  jobs are created and infrastructure and other investments are made. If the first half of 2012 is any indication, the second part of the year is sure to be bright.