Sunstone Hotel Investors, Inc. (SHI) announced yesterday that it was the successful bidder at a foreclosure auction and acquired the fee-simple interest in the Royal Palm Hotel, located on Collins Avenue in Miami Beach.
“We seek unique opportunities to acquire exceptionally well-located hotel real estate at discount valuations,” states Art Buser, President and Chief Executive Officer of SHI. “Additionally we seek to acquire assets where we may create meaningful value via comprehensive renovation and repositioning programs. This is the right time in the cycle to undertake deep turnarounds as redevelopment costs are low and displacement will be minimized.”
The gross purchase price for the the Royal Palm was approximately $126.1 million before transaction costs. Prior to the auction, SHI purchased a portion of the outstanding debt at a discount to par resulting in an economic gross purchase price of approximately $117.0 million or approximately $286,000 per key.
To achieve optimal positioning, the company has initiated a request for proposals (“RFP”) process to select the appropriate manager to capitalize on the unique attributes and superior location of the Hotel.
Upon completion of the RFP, Sunstone plans to immediately commence a comprehensive renovation and redevelopment program that is scheduled to require approximately two years to complete. The renovation will entail replacing or refreshing virtually every aspect of the guest experience, including all furniture, fixtures, equipment, and operating supplies.
The transaction is expected to close in the third quarter.