|By Keith Reed, Globe Staff, The Boston Globe|
Knight Ridder/Tribune Business News
May 17, 2005 - One great day made for one very good year for Sonesta International Hotels Corp., whose 476 percent stock increase during the year ended March 31 made it the best-performing Massachusetts public company.
"It's all tied to one transaction," said Peter J. Sonnabend, Sonesta's chief executive, whose family controls about 60 percent of the stock in the Boston company.
On Jan. 17, Sonesta unveiled a $400 million plan to redevelop its Sonesta Beach Resort in Key Biscayne, Fla., as what it bills as an ultraluxury, 10.5-acre condominium and hotel project, opening in 2008. Sonesta is transferring its ownership into a partnership with Florida developers Fortune International.
Vowing to "create one of the most luxurious condominium hotel resorts in the Western Hemisphere,' " Sonnabend predicted the resort would "open a new universe of management opportunities for our company."
Wall Street apparently loved the vision -- and the $120 million it would inject into Sonesta's coffers. Sonesta stock rocketed from $8 to $18.50 before the day was out. Over the next month, the stock kept rising to a record high of $42.35 before beginning to fall back to earth.
The $120 million infusion includes $30 million in cash, $30 million from Fortune's assumption of the mortgage on the property, and $60 million from the sale of the new condominiums.
The Key Biscayne project, in which Sonesta will hold a 50 percent interest, promises to be a huge growth engine for Sonesta, which owns, manages, and operates 24 hotels and resorts around the world and three cruise ships on the Nile River, totaling about 5,000 rooms. (They include the Royal Sonesta Hotel on Memorial Drive in Cambridge.)
The hotel chain's fortunes rose and fell over the prior 10 years, and its stock wound up going essentially sideways during that time.
The Biscayne project represents a huge leap in ambition for Sonesta, one investors so far feel highly bullish about. "For a company of our size," Sonnabend said, "a deal like that is bound to have an impact on our stock price."
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