In the wake of the Great Recession, New York developers and investors are descending into Miami, spending millions to upgrade historic hotels and acquire redevelopment sites. For example, the Nakash family, whose Jordache Jeans were popular in the 1980s, owns five hotels in Miami Beach, including the Thompson Hotel Victor at 1144 Ocean Drive. They are seeking city approval for a multimillion-dollar renovation of the Thompson Hotel Victor it bought for $27.5 million in July 2011 (the company brought in Thompson Hotels to take the property to a higher level).
Other New York developers with big plans for Miami Beach include the Chetrit Group, The Witkoff Group and the LeFrak Organization. In April 2012, the Chetrit Group paid $10.82 million for the entire Miami Beach block - the project is to be called the Collins Park Hotel. Locals have been optimistic about the project given that the area is in need of rehab. Chetrit also recently received city approval to renovate and expand the Versailles Hotel at 3425 Collins Avenue and to add a 10-story, 54-unit condo tower in the back of the property.
The Witkoff Group, which specializes in acquiring distressed properties, has a contract to buy the Wyndham Garden hotel at Washington Avenue and Tenth Street. It wants to renovate the hotel, increasing the number of hotel rooms to 181 from 130. LeFrak, in a partnership with Starwood Capital Group and Invesco, is spending more than $100 million to restore and reposition the former Gansevoort hotel and condominium. When it reopens, the 334-room hotel with 255 condos will be renamed The Perry South Beach.
What's fueling this wave of development? The city's hospitality industry - which has one of the nation's strongest occupancy and room rates, a trend that began during the recession and survived it. Meanwhile, NYC continues to show activity. In lower Manhattan, One World Trade Center is expected to start welcoming its first tenants by the end of 2013. Condé Nast is famously the largest one to have signed up already (it will be a total of 1.1 million square feet of leased space); roughly 5,000 employees of the company should move into the building by 2013.
The media company is a fantastic addition to the commercial mix of the Financial District which is becoming less financial and more diverse. This should benefit rents as well since Condé Nast is paying $60 per square foot leased versus the average $47 for a class A building in Downtown NYC in the third quarter 2012. A $250 million upgrade and expansion of the retail portion of the World Financial Center (next door to the World Trade Center) is expected to be completed by 2013. The project will add 177,000 square feet of revamped retail space back to the market.
That's enough for more than three dozen higher-end stores and a 25,000-square-foot gourmet food marketplace as well as up to six restaurants spread over 40,000 square feet. The opening of Brooklyn's Barclays Center in September has already generated increasing commercial real estate prices in the area. But as deals negotiated in 2012 start to close and new retail and office tenants begin to move into the area, the impact on the neighboring commercial market is expected to be even greater in 2013.
For retailers, the demand will come from the realization that 18,000 people are going to be here 250 nights a year with money to spend. o Riccardo Ravasini is a real estate maven and has been an active agent in New York since 2008. He grew up in Italy where he studied Business and Finance at Bocconi University in Milan before moving to New York. He enjoys assisting people in the search for the perfect rental apartment as well as international investors looking for investment properties. Contact him at rava@ravarealty.com.
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