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REIT plans major renovation for 409-key locale
Sunstone Hotel Investors Inc. said it was the successful bidder at a foreclosure auction for the 409-room Royal Palm Hotel on Collins Avenue in Miami Beach, Fla. The REIT acquired the 8-year-old property for a gross purchase price of $126.1 million before transaction costs. (Prior to the auction, Sunstone bought a portion of the hotel's outstanding debt at a discount to par, lowering the net price to $117 million, or about $286,000 per key.)
“This is the right time in the cycle to undertake deep turnarounds as redevelopment costs are low and displacement will be minimized,” said Art Buser, Sunstone's president and ceo. “While the 409-key Royal Palm may not be a typical REIT acquisition, it fits squarely within our target criteria – excellent real estate, well located within a perennially strong market, with significant upside potential through a full renovation and repositioning program.”
Sunstone said it has started the process to select a manager for the property. Once that has happened, the company said it plans to put the hotel through a comprehensive renovation program aimed at “transforming the hotel into one of the premier destinations on South Beach.”
In its news coverage of the sale, The Miami Herald noted that the Royal Palm has been “mired in debt and drama for years,” having gone through a string of owners and legal battles.
Royal Palm will become the 31st hotel in Sunstone's ownership stable. Most of the REIT's hotels are in the upper upscale segment, and are generally operated under such nationally recognized brands as Marriott, Hilton, Hyatt, Fairmont and Starwood Hotels & Resorts.
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