London + Regional Properties buys Fort Lauderdale Marriott hotel

The 315-key hotel sold for $154K per room

Procaccianti Companies CEO James A. Procaccianti and 6650 North Andrews Avenue

Procaccianti Companies CEO James A. Procaccianti and 6650 North Andrews Avenue

Procaccianti Companies sold a Marriott hotel in north Fort Lauderdale to London + Regional Properties, records show.

The Cranston, Rhode Island-based company sold the 315-key hotel at 6650 North Andrews Avenue for about $154,000 per room. An affiliate of London + Regional Properties secured a $24.9 million loan from Wells Fargo to acquire the property.

Procaccianti paid $35 million for the hotel in 2006, according to property records. It was built in 1986 and is near I-95.

London + Regional Properties, a U.K.-based luxury hotel and resort company, recently bought the Palm House Hotel in Palm Beach for $39.6 million. In January, the company paid nearly $49 million for the Pullman Miami Airport hotel at 5800 Blue Lagoon Drive in Miami.

Procaccianti was founded in 1958 and has completed real estate deals worth more than $10 billion, according to its website. In 2017, the company paid $9.2 million for a 11,600-square-foot office building at 231 Royal Palm Way in Palm Beach.

In South Florida, thousands of new hotel rooms are hitting the market, which is driving down occupancy rates. In the first quarter, the hotel occupancy rate in Broward County fell to 83.5 percent, about a percentage point drop from last year, according to hospitality industry monitor STR.

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A growing problem: Cannabis retailers want LA’s unlicensed pot shops shuttered

The Southern California Coalition said legal shops can’t compete with illegal ones that sell “tainted” products

June 11, 2019 10:59AM
Southern California Coalition Executive Director Adam Spiker and City Hall

Southern California Coalition Executive Director Adam Spiker and City Hall

The legal cannabis industry is asking Los Angeles officials to crack down on illegal retailers in the city.

The cannabis industry group, Southern California Coalition, sent a letter to the city, urging officials to raid illegal shops selling “tainted” products and confiscate products and cash, according to the Los Angeles Times. Currently, the city does not seize products or cash following raids.

Illegal retailers present a serious threat to some legal brick-and-mortar pot purveyors. Unlicensed shops outnumber legal ones in the city, which pay taxes and must abide by quality-control standards and local regulations.

Because of those reasons, the Southern California Coalition said that licensed shops can’t compete with the unlicensed ones.

Landlords have largely avoided heat from the city for renting out their spaces to unlicensed shops, but officials have started to pursue them as well. Earlier this year, the city’s top cannabis regulator said L.A. should should start enforcing the laws it has on the books.

Those include a $20,000-per-day fine to landlords for allowing unlicensed operations on their properties, along with cutting off utilities, and padlocking retail spaces.

In April, the L.A. city attorney sued the DAUM Commercial Real Estate agents who brokered a deal for an illegal shop, as well as the landlord and the retailer. City Attorney Mike Feuer’s office has brought 120 criminal cases against 105 allegedly illegal businesses as of September, it has said. [LAT]Dennis Lynch

JLL mulling future of debt team amid HFF merger

Merger could result in departures

Aaron Appel (Credit: Catherine Gibbons)

JLL is figuring out the makeup of its debt team amid the company’s acquisition of HFF, multiple sources told The Real Deal.

The brokerage held a meeting Wednesday to discuss how the two debt platforms will integrate in the wake of JLL’s $2 billion acquisition of Dallas-based brokerage HFF, a deal the two companies agreed to in March.

The shakeup could result in the exit of Aaron Appel, who as the head of JLL’s debt-brokerage arm oversaw a team that handled more than $1.7 billion worth of mortgages in 2017, sources told TRD.

Appel, who joined JLL in 2014, denied rumors circulating Wednesday that he had been fired.

HFF is a significantly bigger player in the commercial-mortgage brokerage game. The company advised on $61 billion worth of commercial loans nationwide in 2017, according to data from the Mortgage Bankers’ Association. That’s more than double the $24.1 billion JLL did during that same time.

Owing to HFF’s dominance in the sector, JLL agreed to keep the brokerage’s debt-team leadership in place as the two companies merge. That means Appel would be working under HFF’s leadership team. While widely regarded as a talented broker, Appel has a reputation for being difficult to work with, sources said.

Correction: Citing multiple sources, a previous version of this article reported that JLL had fired the head of its debt brokerage team Wednesday. Representatives for JLL denied this after publication. 

Florida Keys developer sentenced for illegally filling wetlands following Hurricane Irma

Bonefish Holdings ordered to pay $50K fine, restore impacted wetlands, and serve probation

Florida Keys aerial (Credit: iStock)

Florida Keys aerial (Credit: iStock)

A developer in the Florida Keys was sentenced for illegally filling and clearing federally regulated wetlands without a permit in the wake of Hurricane Irma.

Bonefish Holdings LLC pleaded guilty and was sentenced to three years of probation, and ordered to pay a $50,000 criminal fine and to fully restore the impacted 3.7 acres of wetlands. Bonefish, led by Coral Springs developer Albert Vorstman, estimated the restoration would cost about $189,000, according to a press release from the U.S. Attorney’s office.

Vorstman, a urologist, has been trying to develop an oceanfront 8-acre property in Islamorada’s Upper Matecumbe Key since he purchased it in 2007, partnering with the Fort Lauderdale architectural firm EDSA, the Miami Herald reported. The Village of Islamorada repeatedly rejected plans to develop the lot into a 49-room eco-tourism resort.

After Hurricane Irma hit the Florida Keys in September 2017, destroying homes, resorts and other properties in its path, the developer hired workers to clear the storm debris and fill the site without a permit, violating title 33 of the Clean Water Act, according to the release.

“The defendant’s actions were designed to intentionally take advantage of what it saw as an opportunity to remove significant additional vegetation and the filling of wetlands, in the hope of easing the path for future development of the site,” the release said.

The Bonefish Holdings property, a group of five lots, was overgrown with invasive plants like Australian pine and Brazilian pepper trees, according to the Herald. The U.S. Attorney’s office said that the company received confirmation from the United States Army Corps of Engineers in 2009 and in 2013 that the property included federally protected wetlands, ensuring that the developer was aware that permits would be required in order to fill and clear the site.

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Hole in one? Richman Group buys part of Boca golf course to build apartments

Richman paid $12.5M for 55 acres

Richard Paul Richman and Boca Dunes Golf and Country Club

Richard Paul Richman and Boca Dunes Golf and Country Club

Richman Group bought a large portion of the Boca Dunes Golf & Country Club in Boca Raton for $12.5 million.

Cove Club Investors, which is led by David Welch of Lighthouse Point, sold 55 acres of the 98-acre golf course to Richman, a Greenwich, Connecticut-based apartment developer. Richman paid about $227,000 per acre for its share of Boca Dunes, at 1400 Southwest 65th Avenue. Richman financed the deal with a $6.8 million loan from SunTrust Bank, property records show.

The site was seeking approval under a previous developer to build 446 multifamily units, according to the South Florida Business Journal.

Homebuilder K. Hovnanian previously bought part of the golf course and is building 211 townhouses.

Richman Group has over 1,500 properties across the country and says it is the seventh largest owner of apartment rentals in the U.S. In South Florida, it is building Blu27, a 330-unit building at 2701 Biscayne Boulevard in Miami’s Edgewater neighborhood.

Increasingly, homebuilders like Lennar and Toll Brothers are buying up golf courses in South Florida and building single-family and townhouse communities. At the end of 2018, in Miami-Dade, Broward and Palm Beach counties, there were 177 18-hole equivalent golf course facilities, down from 189 in 2007, according to the National Golf Foundation.

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AC Hotel next to Sawgrass Mills nabs $29M construction loan

It will be the first new hotel built in Sunrise in at least 15 years

AC Hotels in Sunrise

AC Hotels in Sunrise

One of South Florida’s busiest malls is about to get a new hotel.

Simon Property Group and Norwich Partners scored a $28.5 million loan from Wells Fargo to build an eight-story, 170-room hotel next to the Sawgrass Mills outlet mall in Sunrise. The hotel will be part of the AC Hotels by Marriott brand.

The hotel will be built at 1870 Sawgrass Mills Circle, records show. The project was approved in July 2017 by the Sunrise City Commission.

It will be the first new hotel built in Sunrise in at least 15 years.

Sawgrass Mills, owned by Simon Property Group, is one of the most valuable malls owned by real estate investment trusts in the country. According to a report last year, the mall brings in $1,149 per square foot and is worth $4.1 billion.

AC Hotels was founded in Spain. In 2011 Marriott International and AC Hotels formed a joint venture to launch AC Hotels by Marriott. The Spanish-style brand is known for its sleek designs and artwork in its hotels, which are geared toward millennial customers, according to its website. It has locations in Miami Beach, Aventura and Miami, and a new one is planned for Fort Lauderdale.

Miami-based Key International recently scored a $43 million construction loan to the Fort Lauderdale hotel.

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This obscure Caribbean island is a favorite among the super wealthy

This obscure Caribbean island is a favorite among the super wealthy

The hard-to-reach island is seeing new development projects

June 08, 2019 12:00PM
(Credit: iStock)

(Credit: iStock)

Within the Caribbean islands of Grenada and St. Vincent, there’s a picturesque isle frequented by the super wealthy called Canouan.

The small 3.5-mile by 1.25-mile island has a pristine natural environment and one of the largest coral reefs in the Caribbean. There are just 2,000 residents, but multimillion dollar homes dot the island as well as a five-star Mandarin Oriental resort, according to Fodor’s Travel.

The former marketing director for the Raffles hotel, which previously operated the property before it became the Pink Sands Club and now the Mandarin Oriental, once called the island a place where “the billionaires go to get away from the millionaires.”

The Mandarin has 26 suites facing the ocean, decked out with marble floors and bright colors, as well as a number of sleek modern standalone villas. Each villa can go for as much as $10,000 per night during high season. There’s also a golf course, five restaurants and bars, and a church.

There are other hotels and restaurants outside of the 1,200-acre Mandarin grounds and soon there could be many more. Among the slew of development projects in the works on Canouan are a hotel by Soho House and a new resort by Aman Resorts International.

The island’s airport was recently expanded to accommodate larger planes and a new 120-slip super-yacht marina was built nearby. [Fodor’s Travel] – Dennis Lynch

Truss opening up online commercial leasing platform to other brokers nationwide

The Chicago-based brokerage lists thousands of office, retail and industrial spaces smaller than 10K sf

From top to bottom: Truss co-founders Bobby Goodman, Marshal Hudes, Tom Smith and Andy Bokor; and a view of a Truss office in River North

From top to bottom: Truss co-founders Bobby Goodman, Marshall Hudes, Tom Smith and Andy Bokor; and a view of a Truss office in River North

Truss is letting competing brokerages use its online platform for small-office leasing.

The Chicago-based company is launching Truss CRE, which lets commercial tenants search a database of available properties and execute leases online. The service for now is only available to brokers in the Boston area, but the company plans to expand it nationwide.

Truss lets commercial landlords and co-working firms list available spaces on its platform, where tenants can compare rents and take virtual tours.

So far, the company has been the “tenant broker of record” in all the leases it facilitates, according to co-founder Andy Bokor. But starting this week, other brokers will be able to use the technology to help their clients book tours, negotiate rents and even execute leases, Bokor said.

“We’re taking the know-how of our product that we use for our transaction platform, and we’re making it available to other brokers who we may not have a relationship with,” Bokor said. “They’ll be able to provide an experience that’s dramatically different” from the traditional, “prescriptive” process of manually surveying properties one by one, he added.

During its introductory period, the service will be free for competing tenant-rep brokers.

Bokor co-founded Truss in 2016 with Bobby Goodman, Tom Smith and Marshall Hudes, with the goal of connecting office tenants with spaces measuring 10,000 square feet or less. The platform now also includes retail and industrial spaces among its listings.

After a series of beta tests and funding rounds totalling some $9 million, the service went live early last year.

In January, Truss raised another $15.2 million from a group of investors led by Massachusetts-based General Catalyst Partners. The company now boasts some 300 million square feet of listings offered by about 1,400 unique landlords across 11 markets including Chicago, Miami and Los Angeles.

Under the program, landlords can list their properties on the site for free, and Truss gets a commission on every lease signed.

The firm launched Truss CRE as a way to expand into markets where it doesn’t already employ brokers, Bokor said.

“We feel there’s enough business to go around” for other brokerages to use Truss’ technology, Bokor said.

More than half of the tenant-rep brokers active in Downtown Boston and Cambridge, Massachusetts already are using the platform, according to the company.

Large-scale office and industrial leases typically are negotiated by major brokerages like JLL and CBRE, while local shops market spaces with 50 desks or fewer. When a big brokerage comes across a space it considers too small for it to handle, it will often “kick it over” to Truss, Smith told The Real Deal earlier this year.

The firm focuses most heavily on offices measuring between 3,000 and 5,000 square feet, enough space for some 25 employees, Smith added.

In 2017, Truss partnered with tech firm Matterport to incorporate 3D virtual tours offices into its platform.

Months earlier, CBRE acquired Floored, one of a host of tech startups offering virtual tours. Between 2012 and 2017, virtual reality companies raised nearly $4.7 billion in combined capital.

Hilton chief talks China, the Waldorf Astoria and tipping at NYU hospitality conference

Hilton chief talks China, the Waldorf Astoria and tipping at NYU hospitality conference

CEO Christopher Nassetta spoke with New York Times columnist Andrew Ross Sorkin at NYU’s annual hospitality investment conference

From left: Hilton Worldwide Holdings CEO Christopher Nassetta, the Waldorf Astoria at 301 Park Avenue, and China President Xi Jinping (Credit: Getty Images)

From left: Hilton Worldwide Holdings CEO Christopher Nassetta, the Waldorf Astoria at 301 Park Avenue, and China President Xi Jinping (Credit: Getty Images)

Hilton Worldwide Holdings’ dealings with the Chinese government, the Waldorf Astoria and tipping practices were all topics of conversation during a lunchtime interview with the hotel company’s chief executive.

Hilton CEO Christopher Nassetta got up on stage at the annual NYU International Hospitality Industry Investment Conference with New York Times columnist Andrew Ross Sorkin for the one-on-one chat under rote circumstances: Hilton was a major sponsor and the company’s centennial was a few days earlier. But the discussion quickly veered into unexpected territory.

Nassetta began by recalling his first job at a Holiday Inn where he was the first responder to any “Code Brown.”

When asked about Hilton’s strategy in China, Nassetta said the company’s goal is to “build a very big network effect” in China, largely targeting the “mid-market” sector in secondary and tertiary cities.

Nassetta explained that their aim is to build loyalty so that outbound Chinese travelers choose to stay at Hilton hotels.

He said Hilton doesn’t own hotels in the country, opting instead to negotiate management and licensing agreements with local owners, many of whom are connected to the government. Those political ties “we think, mitigate against much of the risk” of “trade issues or otherwise,” he said.

Sorkin asked whether Nassetta believes that outbound travel will continue to exist in the same way and the CEO responded unequivocally: “I think over the long term, the trend is unstoppable.”

China’s “gargantuan” middle class “wants to see the world,” he said, and though “in their system of government” travel is “stoppable,” he doesn’t see that happening.

“Who am I to tell Xi Jinping what he should be doing, but I think that at its core to stay in power… they want their people to be reasonably happy with a managed economy,” Nassetta said. “And I think part of that is travel.”

He characterized the trade dispute between the U.S. and China as having a “modest” impact on the American hospitality industry to date. (Within a day of his remarks, China issued a travel warning to citizens about harassment by American law enforcement agencies.)

When asked about the status of the Waldorf Astoria, which Hilton sold to Anbang Insurance Group for $1.95 billion in 2014, Nassetta said construction was “underway.”

“We’ve got to get the conference back over there,” Nassetta joked in response, before describing the “almost eerie” interior demolition that’s “completely gutted” the iconic hotel.

The massive renovation includes dramatically downsizing the hotel from more than 1,400 rooms to roughly 400 (and about 350 condos). After the Chinese government took control of Anbang last year and began selling off its operating assets, “they committed to keeping the Waldorf and completing the renovation,” Nassetta explained. He said he expects the hotel to open its doors in fall 2021. Hilton has a 100-year operating agreement for the property.

The interview concluded with Sorkin asking how much of a tip Nassetta planned to leave in his hotel room that night.

“I typically do not leave a tip,” replied the Hilton chief, whose total compensation in 2018 was about $19.8 million.

“Is that standard policy do you think?” Sorkin asked.

“I don’t know. How many people leave a tip?” Nassetta said, putting the question to the crowd. The majority of hands went up. “Wow. I’m not leaving tonight so…” he trailed off to laughter from the audience.

“It’s a large and vast market of opportunity:” Behind Rexford Industrial’s real estate rampage

Rexford Industrial co-CEOs Howard Schwimmer and Michael S. Frankel and Rexford properties in Thousand Oaks and Industry

Rexford Industrial co-CEOs Howard Schwimmer and Michael S. Frankel and Rexford properties in Thousand Oaks and Industry

As one of the largest industrial landlords in Southern California, Rexford Industrial owns more than 22 million square feet of property across the region, about half of which is in Los Angeles County.

At a time when industrial real estate prices are soaring across the country — the Blackstone Group announced Sunday an $18.7 billion acquisition of warehouse assets — Rexford has closed some of the biggest purchases and sales in Southern California over the last several years.

Last year, the real estate investment trust spent $500 million on industrial properties and is keeping up its pace this year. On Monday, the company touted its $34.5 million purchase of two more industrial properties in infill markets near Los Angeles.

The Real Deal caught up with Howard Schwimmer and Michael Frankel, who co-founded Rexford in 2000 and now serve as its co-CEOs, to talk about how they pencil out deals and compete for transactions in one of the country’s hottest industrial markets.

As one of the most active investors in L.A., what’s your short- and long-term strategy?

Michael Frankel: Rexford is solely focused on infill [industrial real estate] in Southern California and [our goal is] to grow the company some multiples of what it is today and stay focused on infill Southern California. It’s a large and vast market of opportunity for us.

Rexford isn’t the only one buying up property — is it a race to hold as much industrial space as possible?

Howard Schwimmer: If we were in a race to buy for the sake of buying, we’d be five or 10 times bigger than we are right now. We make a lot offers on substantially more product than we buy.

Frankel: For us it’s a race to find the right investment opportunities, because our goal is to find deals where we can create value. Industrial is hot and you see a lot of institutional capital targeting industrial, but they’re just kind of moving the “Monopoly” pieces around, whereas we’re looking for opportunity or create more value.

Where do you see the best opportunities to create value?

Schwimmer: Our focus is on markets that don’t have much of any land to talk about, so the opportunity is really in creating value in older assets and occasionally funding an opportunity to build a new structure.

Frankel: In this market, when you think of institutional quality, a lot of people think of brand-new buildings with a lot of glass that look really pretty. But we’re looking at… institutional quality investment. Nowhere in the country can you find better tenant demand fundamentals than you can in infill Southern California, irrespective of the vintage of the building.

How do you navigate a tight market and compete with other investors?

Frankel: We have a dedicated research team and we combine that with a broker marketing and loyalty program, so we consistently bring opportunities to brokers. We bring brokers into deals all the time because they’re best suited to make the seller feel comfortable with the transaction.

Schwimmer: The typical model for most buyers, when we talk about institutional capital, is they’re buying institutional quality industrial real estate. They’re spread thin — they typically have a team that covers many markets in addition to Southern California — so they mostly see fully marketed deals that brokerages put out. When you’re competing [for those deals], it’s really a beauty contest to see who will accept one with the lowest yield. We didn’t want to be in that type of a business. That’s why we focus on off-market deals driven by our own internal research.

Does the REIT model offer advantages in the industrial space?

Frankel: It does. We like the competitive cost of capital. We have permanent capital through the public markets. It enables us to scale in a way to outcompete non-public players. Having a public currency can be an attractive opportunity for a seller who can trade property to Rexford in exchange for ownership in Rexford for a tax-deferred basis. That’s what we call an UpREIT transaction.

You started Rexford almost 20 years ago. Why did you choose the industrial sector?

Frankel: I’ve been doing this for 36 years and I don’t think I knew what I was getting into when I started, but I’m finally in the right place at the right time. There’s tremendous benefit to being focused. It’s difficult to be as focused as we are and create the kind of competitive advantage in what we do if you’re focused across multiple asset classes or even geographies.

Schwimmer: We have owned properties on the creative office side in the past. Those are capital intensive businesses as tenants roll in and out of properties. Our focus is on what we call low-finish industrial. They’re generic buildings that are easily adaptable for tenants to move into, so the frictional cost of moving tenants in and out is extraordinarily low compared to the office side.

What sort of properties and amenities are now in demand?

Frankel: In infill markets, technology is not necessarily a driver for an e-commerce distributor. The most important thing is proximity to the customer. E-commerce is driving a dramatic increase in the movement of warehouse goods and demand for shorter delivery timeframes.

How what kind of impact will an economic downturn have on industrial demand?

Frankel: From early 2009 to late 2010, we saw about a 25-percent reduction in containerized imports through the ports of L.A. and Long Beach. You would think the industrial market must have suffered — [but] it depends on where you own. If you were in the eastern Inland Empire, vacancy doubled, tripled or worse during the Great Recession. In L.A. and Orange counties, vacancy barely moved from 2-4 percent to 3-5 percent, depending on the submarket. These are mission critical locations for most businesses. If they didn’t have to be [here] they would have left a long time ago because it’s the most expensive market to rent in.

Schwimmer: That’s why we have chosen to remain solely focused on infill Southern California.

Who gets to the office first?

Schwimmer: We get here at the exact same time, every day.

Frankel: We still feel like we’re barely out of the starting gate in terms of the company that we have a vision to build. What makes us successful as partners is we’ve always been clear [and communicate our desire] to build a great business. If you stay true to that singular goal, nothing else matters and everything else follows.

This interview has been condensed and edited for clarity.