MIAMI—The hotel transactions market is more or less at a standstill in Miami, but there’s more to blame than non-existent debt financing. Strong increases in fundamentals—including a double-digit gain in revenue per available room during 2010—have encouraged owners to hold out as they ride the wave of recovery for the foreseeable future.
Miami ended 2010 with a 7.9% increase in occupancy to 70.2%, a 2.8% bump in average daily rate to US$144.13, and a 10.9% jump in RevPAR to US$101.19, according to Hendersonville, Tennessee-based STR, the parent company of the Hotel Investment Barometer.
“Miami is doing very well, and South Florida is doing very well. That’s a good sign,” said Stephen P. Taylor, a Miami-based VP of Hunter Realty Associates.
During the first quarter of 2010, the market posted a 2.9% increase in occupancy to 80.8%, a statistically insignificant 0.1% ADR decline to US$181.46, and a 2.8% RevPAR gain to US$146.62.
There have been two recent transactions of note in Miami, according to STR Analytics research:
• A joint venture between InSite Group and Cube Capital on 20 April bought the 251-room Continental Oceanfront South Beach Hotel from RFR Holding LLC for US$61 million.
• KSL Capital Partners LLC on 12 April bought the 417-room The Royal Palm Hotel from Sunstone Hotel Investors for US$130 million.
KSL plans to renovate the Royal Palm under The James brand as The James Royal Palm. The renovation plan includes improvements to all of the guestrooms, guest baths and public areas of the hotel, including new restaurants, a spa, outdoor spaces, and furnishings to bring the hotel up to the exacting standards of The James brand. The renovation is scheduled to be completed in late 2012.
Meantime, executives from Morgans Hotel Group Company on Monday denied reports that they were planning to sell the Delano hotel on South Beach, according to The Miami Herald.
Clogs in the transactions market
Properties are available in the market, said Scott W. Brush, president of Brush & Company, a Miami-based hotel consulting firm. “There are probably some things out there that people aren’t jumping on.”
So why aren’t more investors buying? The aforementioned slowdown in debt financing represents a huge obstacle—except, of course, for the equity-heavy real-estate investment trusts.
“Individual purchasers typically can’t get the financing and don’t have the mass of equity needed to get into these things,” Brush said.
Then there’s the bid-ask spread, which hasn’t quite rectified itself, he said. Either the existing owner has too much invested in the hotel to sell at bargain-seekers’ prices, or banks holding distressed assets aren’t willing to take such big hits by pushing the hotel to market.
Miami also has seen a number of new hotels open during the past two or three years, and owners aren’t yet ready to sell, Brush added.
| Year | Hotels opened | Rooms opened |
| 2008 | 11 | 2,035 |
| 2009 | 12 | 1,932 |
| 2010 | 7 | 681 |
| 2011 YTD | 1 | 45 |
Source: STR
Transactions slow to ramp up
Hunter’s Taylor doesn’t expect transactions to return to peak volumes until sometime during late 2012, around the next presidential election.
“Until there’s more certainty in the market … we’re not going to have much movement,” he said.
The market, however, will begin to show movement before then, Taylor added.
“There are things being planned. There are things being discussed. People are looking at doing different things. That’s a good sign that people are at least contemplating new projects.”