Blackstone Group LP (BX) agreed to sell the Miami Beach Resort in Florida to Joseph Chetrit for $117 million as part of a debt restructuring in its LXR Luxury Resorts & Hotels unit, a person with knowledge of the deal said.
Chetrit, the New York investor who agreed earlier this month to buy Sony Corp.’s U.S. headquarters in Manhattan, plans to renovate the 424-room oceanfront hotel, said the person, who asked not to be identified because the information is private. The resort, formerly known as the Doral, once was a renowned venue where entertainers such as Frank Sinatra performed.
Peter Rose, a spokesman for New York-based Blackstone, and Kathleen Cudahy, a spokeswoman for Chetrit, declined to comment.
The Miami Beach Resort is part of a portfolio of luxury hotels formed under the LXR brand after Blackstone acquired Wyndham International Inc. in 2005. The private-equity firm refinanced the debt in 2007 with a $1.1 billion loan that was packaged into bonds and sold to investors, according to Morningstar Inc. (MORN) and data compiled by Bloomberg. That loan is with a special servicer -- a firm that negotiates with bondholders to work out debt -- and Blackstone is selling some of the 12 properties in the portfolio after extending the maturity in September to 2014, the person with knowledge of the deal said.
Net cash flow at the properties was $55.1 million during the 12 months ended June 30, up from $51.3 million for the year ended Dec. 31, 2011, according to a report from Morningstar’s Structured Credit Ratings unit. Net cash flow was $90.9 million for the period ended Dec. 31, 2008, according to the firm.
The portfolio wasn’t operating at capacity in 2007 and part of 2008 because many of the hotels were going through renovations, according to the Morningstar report. Also, one property was released as collateral in 2007, leaving 12 properties, according to the report.
Blackstone requested an extension of the loan to gain time to increase cash flow at the hotels and for capital markets to recover, Morningstar said.
“While the loan continues to cover its debt service, we are concerned with the sharp decline in net cash flow that hinders the loan’s prospects for refinancing,” Morningstar said in the Jan. 9 report.
The September loan modification required the sale or refinancing of properties totaling $447.45 million by May 9, 2014, Morningstar said. If the sale and refinance goals aren’t met, the special servicer can seize or sell the collateral through a court-appointed receiver, according to the research company. The deadline for completion of the plan and full repayment of mortgage debt is Sept. 9, 2014.
Blackstone sold another LXR property, the Golden Door Spa in Escondido, California, for $24.8 million in December. Other resorts in the portfolio include the El Conquistador Resort in Puerto Rico, the London West Hollywood in California and Casa Marina Resort in Key West, Florida, according to data compiled by Bloomberg.
For the year ended June 30, net cash flow from the properties was $55.1 million, down from $211.1 million at underwriting, according to Morningstar. The debt-service coverage ratio, or cash available to make debt payments, increased to 6.15 from 3.65, because lower interest rates on the floating-rate loan offset falling cash flows, the firm said.
In addition to the $1.1 billion Sony tower acquisition, Chetrit’s other purchases include Manhattan’s Chelsea Hotel in 2011. His Chetrit Group also owns Chicago’s Willis Tower, North America’s tallest building.
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