Q&A: Why Miami Hotel Prices are Breaking Records (Part 1) and New York Investors Rush Miami Hotel Market (Part 2)

April 18, 2014

Part 1: Why Miami Hotel Prices are Breaking Records

MIAMI—It’s no secret that New Yorkers are among the most active investors in Miami Beach hotels. What’s the connection? And why are boutique hotels suddenly so hot? We caught up with Suzanne M. Amaducci, partner with Bilzin Sumberg Baena Price & Axelrod who leads the firm's hospitality group, to get her take on these and other questions in part two of this exclusive interview. You can still go back and read part one, "Why Miami Hotel Prices are Breaking" records, if you missed it.

GlobeSt.com: One of the most active real estate groups buying hotels in Miami Beach are New Yorkers. What’s the New York-Miami Beach connection?

Amaducci: There has always been a natural synergy between New York and Miami. Much of the hedge fund money and international investors come through New York but New Yorkers have a love affair with the Miami culture. We are also seeing a large uptick in New Yorkers buying luxury residences here.

GlobeSt.com: What is happening with the boutique hotels in Miami Beach that all of the sudden investors are going after them?

Amaducci: I would not say all of a sudden. Boutique hotels have simply evolved over time. Each property tends to be unique as far as the real estate is concerned. But all boutique hotels have a common focus on quality and customer service and maintain a strong and loyal customer base.

We see many types of boutique hotels developing a unique identity. For example, the Betsy is known for its arts and philanthropy focus while Kimpton and SLS are known for their food and beverage outlets. Now, fashion icon Tommy Hilfiger is entering the Miami Beach market with plans to buy and renovate a boutique hotel and put his own spin on it. Even the national hotel brands, like Marriott with its Edition concept, have or are developing their own boutique brands in an effort to compete in this popular market segment.

Boutique hotels have been sought after investments for foreign families with extensive hotel ownership and operational expertise abroad. These investors tends to be all cash buyers. Lately, hotel investors have been combining property operations for several boutique hotels under one umbrella and creating a campus feel while reducing costs and increasing operational efficiencies for these smaller properties. Boutique hotels seem to have something for everyone.

GlobeSt.com: In the last decade, Miami Beach has transformed itself into a global city. From tourists to foreign investors, they all want to be in Miami Beach. How is that transformation impacting Miami Beach real estate?

Amaducci: Simply put, Miami Beach has become a luxury brand. Whether you look at hospitality, retail, residential, restaurant space or even the marinas—each is commanding a record-breaking price. It was not that long ago when a mom-and-pop business could afford a location on Lincoln Road.

In today's market, it is high rents and luxury offerings catering to very sophisticated customers. But for those that like the old Miami Beach, you can still find a few hidden treasures and bargains—you just need to look a little harder for them.

This article is reprinted with permission from GlobeSt.com.

Part 2: New York Investors Rush Miami Hotel Market

MIAMI—Suzanne M. Amaducci, partner with Bilzin Sumberg Baena Price & Axelrod and leads the firm's hospitality group, has her finger on the pulse of hotel deals happening in Miami and Miami Beach’s hot hospitality market. Indeed, at a time when everybody seems to want to own a piece of Miami commercial real estate, Amaducci can tell you who’s getting financing, what is fueling the demand for hotels, and the latest trend involving boutique hotels in South Beach.

GlobeSt.com caught up with Amaducci to get her take on the market in part one of this exclusive two-part interview. Be sure to come back this afternoon for part two, where she will talk about the New York-Miami Beach connection.

GlobeSt.com: In the last six months, we have seen a growing number of hotels being refinanced. What kind of criteria lenders are looking for?

Amaducci: First and foremost, a lender wants to see a strong historical operating performance. Any hotel that has consistently performed well during the downturn will be looked upon favorably. After the operating performance, lenders look at the strength of the sponsor, management expertise, brand location—at a time when top tier markets are still preferred—cash flow and low leverage. They are all very important factors.

GlobeSt.com: We are seeing a tremendous amount of hotel activity in Miami, especially Miami Beach. What is fueling it?

Amaducci: Miami and Miami Beach have really become popular destinations but for different reasons for different people. For investors, Miami is consistently one of the top five hospitality markets in the country for the three keys business metrics: ADR (Average Daily Rate), occupancy and RevPar (Revenue Per Available Room.) Miami has achieved a number one rating several times this year already.

For foreign investors, Miami is part of the U.S. and is viewed as a "safe" place in which to invest. For customers --tourists and business people alike-- it is a destination. Miami has the arts, fine restaurants, signature events, world class shopping, sophisticated business investments and opportunities and favorable state income tax treatment. Miami is also becoming a center for international arbitration and is less expensive than other world class cities. And most important to many, Miami has the sun—it has been a terribly cold winter in the Northeast.

GlobeSt.com: How is it possible that as we enter into a new real estate cycle, we are seeing hotels trade at breaking-record prices?

Amaducci: The answer is simple—strong business metrics, a limited supply and a growing demand with access to significant amounts of cash.

This article is reprinted with permission from GlobeSt.com.

Suzanne M. Amaducci
Chair of Real Estate & Finance
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