I know it becomes repetitive, in 91 we bought our first hotel in Aussie out of foreclosure at a heavily discounted price. So what you ask? The hotel was run as a business generating cash flow repaying debt and making dividend payments to shareholders and ultimately sold for a handsome profit as a real estate play 10 years later.
Gansevoort South hotel goes from buzz to bust
Once the haunt of celebrities, Miami Beach's Gansevoort South hotel will soon be sold at auction, a victim of foreclosure.
BY DOUGLAS HANKS
Good buzz was no match for bad debt at the Gansevoort South, a Miami Beach hotel popular with stars now destined to be sold at a foreclosure auction.
Credit Suisse announced Wednesday morning an auction for the ownership stake used to secure an $89 million mezzanine loan on the 334-room oceanfront hotel, a favorite stop for celebrities hitting the party circuit. Developers William and Michael Achenbaum secured the financing for the project at the height of South Florida's real estate boom, only to see their plans for the former Roney Palace roiled by the collapse of the condo market.
Sales were dismal for condos in an adjoining residential tower and in 2008, the Achenbaums halted plans to convert about a third of the hotel rooms into condo-hotel units. That left the father-and-son team to rely on hotel revenue to make debt payments on their construction debt, a task made even harder by what experts describe as the worst lodging downturn in a generation.
Despite its troubled debt, the Gansevoort, located at 2377 Collins Ave., enjoys as much buzz as any of South Beach's most high-profile hotels. It was a frequent backdrop in the Bravo reality show Miami Social. A popular online video captured Michael Phelps racing retired NFL star Warren Sapp in the Gansevoort's rooftop pool -- the Olympic champion gave Sapp a half-pool head start and still won -- and rapper Ludacris picked the Gansevoort as one of two spots to promote his new cognac, Conjure. The New York Times last weekend called the hotel South Beach's ``of-the-moment spot.''
The hotel remains open and under the control of the Achenbaums' Gansevoort Hotel Group. ``Operations at Gansevoort South hotel remain status quo,'' Michael Achenbaum said in a statement released Wednesday afternoon.
The Hotel Gansevoort, the Achenbaum hotel in Manhattan's Meatpacking District targeting the same affluent and hip traveler, is not involved in the foreclosure action.
He said he and his father hoped to buy back the loan at the auction and retain ownership. He blamed the financial woes on the condo component of the property and not the hotel, which the statement said is ``financially profitable and capable of covering its respective debt.''
Long a mid-priced convention hotel on Miami Beach, the Roney Palace and the adjoining Roney condo complex filed for bankruptcy in 2004. Chicago developer Joseph Chetrit paid about $150 million for the property months after the Chapter 11 filing, then sold his company's interest to the Achenbaums after a failed joint venture between the two groups.
Because the $89 million loan was backed by the Achenbaum ownership stake -- and not the Gansevoort property itself -- the Jan. 28 auction announced Wednesday does not constitute a traditional foreclosure proceeding. Known as a ``UCC auction,'' the sale is conducted under laws governing loans with equity stakes as collateral.
The winning bid would take control of the company that owns the hotel, but also assume a big liability: a $314 million mortgage on the real estate itself, according to documents posted online by Credit Suisse's agent in the sale, Jones Lang LaSalle Hotels.
TIP OF THE SPEAR?
The Gansevoort could be the leading edge of what analysts predict will be a wave of banks seizing hotels throughout South Florida next year.
With defaults rising on hotel loans, lenders are under pressure to foreclose on the properties and clean up their balance sheets. And with room revenues predicted to drop again in 2010 throughout South Florida, those owners reaching into their pockets to make hotel loan payments say they're not willing to fund losses indefinitely.