A rendering of the Residence Inn by Marriott in Miami Beach/Surfside, which broke ground in January. The $52-million project is a JV between Hotel Equities and IRE Capital.
Miami–Independent hotels are well represented in Miami Beach, but the big brands are making an unprecedented push into the area, seen as one of the best hotel operating environments in the U.S.
Enter Atlanta-based Hotel Equities, which broke ground in January on the $52-million Residence Inn by Marriott in Miami Beach/Surfside. Hotel Equities is co-developing the 175-room property with Hotel Development Partners (HDP), a joint venture with Atlanta-based IRE Capital.
The Residence Inn project marks the second venture for Hotel Development Partners, the first deal being the November 2012 acquisition of the 105-room Fairfield Inn & Suites in Charleston, S.C.
This particular Residence Inn project was in the making for a while, explained Brad Rahinsky, COO of Hotel Equities. “This was a complex deal that died a number of deaths,” he said. “It was kicked around and we came in two years ago.”
That was when Hotel Equities hooked up with the landowner of the intersection of Collins Avenue and 92nd street, who at the time was looking to do something on the plot that was upper-upscale, high-end or mixed-use residential.
“When we first got involved, it was not going to be a Residence Inn, but a different flag altogether, not Marriott branded,” Rahinsky said. But Hotel Equities and the unnamed landowner started a relationship, and discussed other opportunities for the spot. That’s when the Marriott deal came to life. “Marriott wanted to get into the market there; they thought it was a good play and expressed interest quickly,” Rahinsky said.
Ultimately, the landowner put up the land to get into the deal as an investor. As a new-build, the hotel needed financing, which never was too much of a concern. “Every story is different depending on the market,” Rahinsky said. “For Miami Beach, we were fortunate: Once we got land, the flag and permits secured, there was a lot of interest on the lending side.”
The JV ultimately partnered with a local lending institution that Rahinsky said is familiar with the hotel space and Miami. He declined to identify who the lender was.
As for Hotel Equities, they are not only the manager, but have an equity stake in the development. Rahinsky said that Hotel Equities as a company will do sliver equity all the way up to being the majority principal. “For the Residence Inn, we are one of the largest investors,” Rahinsky said.
The hotel is anticipated to open in late spring 2015. When it does, Rahinsky said it will have the feel of an upper-upscale resort, even though Residence Inn is a brand that, according to STR, competes in the upscale segment. “It really goes above and beyond,” Rahinsky said. The four-story building will be right across from the beach and have such amenities as a rooftop pool. (Marriott was also involved in the design-selection process. Ultimately a local architect group known for upper-upscale and luxury development in Miami and international markets was selected. A design firm was selected that complements the architect.) “There are lots of synergies and consistencies,” Rahinsky said, though not able to yet identify the name of the architect or designer.
➔ 175 rooms
Number of keys in the hotel.
Source: Hotel Equities
No doubt the hotel is opening in the right location at the right time. Besides cities such as New York and San Francisco, Rahinsky said Miami represents the best opportunity for an investor. “From a demand generator standpoint, there is no seasonality in the market,” he said. “There used to be peak, shoulder and slow, not long ago; now, even shoulder seasons are [doing] strong numbers. It’s a robust market.”
It’s also drawing a more diverse set of clientele. Before, Miami was seen primarily as a getaway for Northeast denizens looking to escape winter’s grip. Now, Rahinsky said, there is more international interest, not just from South America, “but Europe and a heavy Russian presence,” he said.
Once opened, the hotel will be neighbors with some pretty elite company, including the recently sold St. Regis Bal Harbour. There are also some properties more in its comp set (Crowne Plaza, Courtyard), but Rahinsky said the hotel will have an advantage. “There is no good extended stay in the market,” he said. “The suite product will help us dominate.”