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Nikki Beach Owner Jack Penrod Embarks on Expansion Into Branded Hotels,
Casinos and a Cruise Ship; Claims 8 Hotels Ready to Go

By Christina Hoag, The Miami HeraldMcClatchy-Tribune Business News

Jan. 30, 2007 - .

Think Nikki Beach, and dance-until-dawn night clubs, champagne sprays on the sand and four-poster beds by the pool come to mind.

Now Nikki Beach owner Jack Penrod wants you to think bigger -- hotels, resorts and even a cruise ship, all bearing the Nikki Beach moniker and its stamp of uber hip luxury.

"We want to grow the brand. That's what it's all about," says Penrod, who opened the first Nikki Beach Club on South Beach a decade ago. It has since grown to span 18 restaurants and clubs in seven countries.

Starting this year, Penrod is steering the Miami Beach-based company into a new phase that encompasses branded hotels, casinos, golf courses, beach resorts, condos and villas.

The move falls into the growing "lifestyle" trend in the lodgings industry where luxury brands are bestowing their names -- and cachet -- on hotels. In recent years, Bulgari, Missoni, Versace, Armani, Ferragamo and Nicky Hilton have struck hotel deals.

"It's clubs, fashion, entertainment coming into the industry," says Mark Lunt, hospitality analyst for Ernst & Young. "Nikki Beach is in the same vein. It's a logical extension of their brand."

Penrod thinks so, too. He's got $500 million in Nikki Beach Hotel & Resorts lined up -- eight ready to go in Reno, Portugal and two each in the Cape Verde Islands, Mexico and Panama, with another dozen deals in the hopper.

STAY TO PARTY

The master plan is to roll out 25 to 30 properties over the next five years, says Gary Sims, partner and president of the new hotels division. The idea is that Nikki Beach's hip clientele will now be able to stay right at the club-hotel for the night, instead of partying there and sleeping elsewhere.

"Our brand was becoming so popular around the world. For many people it's like a lifestyle -- going from club to club," says Penrod, adding that he's eager to open a hotel in Miami Beach. "We want to show that you can have fun in a five-star hotel."

Penrod plans to operate his hotel strategy under several business models.

Many of the projects are joint ventures with real estate developers who are looking to inject their developments with a shot of Nikki Beach pizazz, such as the VIP service, mojitos, al fresco beds and breezy decor. Other deals will involve Nikki Beach operating a property under a management contract or buying the property, revamping it and then selling it, keeping a management deal.

REAL ESTATE MOVE

Nikki Beach will also plunge into developing and selling real estate such as condos, condo-hotels and villas. In Cape Verde, Penrod is teaming up with golfer Ernie Ells to develop a golf course and Nikki Village.

Resort developers have turned to residential components to shield the business from sudden dips -- the potential for downturns, such as the tourism nose dive in the wake of the Sept. 11, 2001 terrorist attacks, makes lenders nervous and drives up financing costs, notes real estate analyst Andy Dolkart.

"Resorts are all discretionary travel," he says. "The salvation has been to go to condo hotel-second home market because financing is a huge problem."

However, it's not clear how successful the condo-hotels move is. Location is a big factor, Dolkart says, and the ticking-up of interest rates could cool the market somewhat.

In Reno, Nikki Beach will be taking over some 200 rooms on the top three floors of the Grand Sierra Hotel to create a boutique hotel within a hotel, complete with a glass-domed beach club on the roof.

Also on the agenda: Nikki Beach at Sea, a $498 million cruise ship that will serve as a floating hotel and party boat sailing 832 passengers between Nikki locales.

The company, which employs 3,700 worldwide, is currently looking over three bids from European shipyards for the vessel, which is slated to launch in 2009.

Penrod plans to team up with a cruise company to operate the venture. "We don't know much about ships," he says.

FUND RAISING

To help fund the expansion, the company is preparing to launch two capital market funds -- one in the United States and one based offshore.

Penrod, who flies a seaplane between homes in Miami and the Bahamas where he lives much of the time with his Nicaraguan-born wife, Lucia, and their five year-old twins, started his entrepreneurial career in the 1960s as a McDonald's franchisee.

After owning 16 Golden Arch restaurants, he created a tourism marketing firm.

In 1985, the city of Miami Beach gave him a 40-year lease for a stretch of oceanfront property and he opened Penrod's Beach Club. That eventually evolved into Nikki's Beach Club.

Now Penrod says he probably won't bother opening more clubs and restaurants.

"It's as much trouble opening a club as a hotel with a club," he says.

But he does plan to keep merchandising the Nikki Beach brand.

A new leisure clothing line called Shop Nikki is in the works and more glossy Nikki Style magazines in other locations.

Penrod keeps financials close to the vest, but says all of his properties are consistently increasing profits.

"I've never had a business like this," he says. "I found out it's all in the marketing."

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Copyright (c) 2007, The Miami Herald

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