After a rough stretch, the South Florida hotel real estate market may well be on the rebound. One sign pointing to hospitality sector recovery is real estate investment firm Wheelock Street Capital’s purchase of The Ben West Palm in West Palm Beach Beach, a new hotel near the city’s downtown, making this one of the largest South Florida hospitality investment sales since the start of the pandemic.
North Carolina based Concord Hospitality sold the 208-room hotel, located at 251 North Narcissus Avenue, for $106.4 million. That averages out to $511,000 per room. Concord will continue to manage the hotel. Wheelock financed the deal with help from a $101.1 million loan from Wells Fargo. CBRE Group, Inc. arranged the sale of The Ben to Wheelock. The property likely traded for much more, since real estate transactions of this type often do not include things like furniture, fixtures, and equipment.
The Ben, a Marriott Autograph Collection property, opened last year. Miami-based Mayan Properties was a partner in the development of the hotel. Adjacent to The Ben is a 435,000-square-foot mixed-use residential, dining, retail and boutique office space on the waterfront managed by Flagler Banyan Square. The area is located on the former site of West Palm Beach’s city hall. The hotel includes a full-service restaurant, 7,791 square feet of event space, a rooftop ballroom and pool, and even an amenities deck, making The Ben an ideal venue for weddings, anniversary celebrations, and business gatherings and, combined with the adjoining retail and office space, makes this area of West Palm Beach important for business and a boon to investors.
Recently heralded in the media as “Wall Street South”, West Palm Beach is in the middle of a development and investment boom following a rocky 2020, with a strong housing market and new-to-market office activity. Big names in the real estate investment field, including Goldman Sachs, Point72 Asset Management, Benefit Street Partners, Susquehanna, Comvest Partners, Norwest Equity Partners, Lewis Longman Walker, and Sanders Capital, have all announced their intentions to establish a large presence in the market. With their acquisition of The Ben, Wheelock intends to take advantage of this “bullish outlook” on the West Palm Beach real estate market, according to an October 2021 press release.
Hotel sales in South Florida in general have thankfully started to pick up since 2020. Earlier in the year, Pebblebrook Hotel Trust paid $270 million for the Margaritaville Hollywood Beach Resort in Broward County.
Wheelock’s purchase of The Ben, as well as its intention to further develop the surrounding area, is only a small part of their development plans. The firm has also teamed up with development and management firm Timber Company to purchase luxury resorts and private residence clubs, according to September 2021 press release. And also, just recently announced their purchase of the South Seas Island Resort on Captiva Island. “… we are actively looking for exceptional properties like South Seas Island Resort to diversify our offerings and expand our footprint,” said Timbers CEO Greg Spencer.
This is just good business. Hotels are a solid investment. “The lodging sector is among the best real estate classes for investing,” says Greg Friedman, CEO of Atlanta’s Peachtree Hotel Group in a recent article. “With the ongoing inflationary environment, hotels are an excellent hedge against inflation due to daily adjustments in average daily rates.”
With the hospitality sector seemingly on the rebound since the pandemic, hotel investors and developers are taking this opportunity to not only expand their existing property portfolios, but to also snatch up distressed hotels for pennies on the dollar, either refurbishing them or, driven by the pandemic-fueled need for affordable housing, converting them into apartments.
The number of hotels behind on their mortgages rose to just over 18% in December 2020, up from less than 2% the previous year. The stay-at-home nature of the pandemic, combined with the cancellation of important conventions and other major events hotels rely upon, has caused hotels to struggle even more than retail real estate.
During the pandemic, a reported 28,084 hotels, representing almost 4 million rooms, have closed. This creates a wealth of opportunities to individuals and firms who want to either expand their footprint in the hospitality industry or create new revenue streams. Many of these hotels are located in places like Florida, which have seen a population surge since the pandemic began.
Whatever is fueling this hotel investment trend, the surge in hospitality growth in West Palm Beach is a welcome respite from the pandemic-triggered stagnation of the previous year. And Wheelock’s acquisition of The Ben is only one small factor in that growth.
At Rabideau Klein, Guy Rabideau, Esq. and David E. Klein, Esq. are dedicated, Florida Bar Board-Certified Real Estate Attorneys with the local expertise and experience you need to ensure that your interests are protected during your real estate transaction in Palm Beach County and throughout the State of Florida. Contact Rabideau Klein today to discuss your real estate legal needs.