|By Hannah Sampson, The Miami
HeraldMcClatchy-Tribune Regional News
May 04, 2011--The boutique hotel company that owns the iconic Delano on South Beach has been on a selling spree.
In the last month, Morgans Hotel Group has announced plans to sell three of its properties in New York City and Los Angeles for a total $277 million as part of a new strategy to focus on managing, rather than owning, hotels.
But what about the Delano, the Art Deco queen credited with revitalizing Miami Beach when it reopened in 1995 after a style-setting makeover from hotelier Ian Schrager and designer Philippe Starck?
In a conference call to discuss earnings on Monday, company executives were asked about plans to sell the 194-room Delano and the Hudson, a hotel in New York. The answers:
"I don't think we have any view that at this point that we have to sell either of those assets," said CEO Michael Gross. "I think they're great assets to own, but I think we'll be opportunistic. ... The Delano is just a core brand and a core piece of what we intend to do going forward."
Added David Hamamoto, the company's executive chairman: "In terms of ultimately having a pure asset light model, obviously ultimately we'll have to decrease the ownership in those assets, but I think it's really a function of time."
The company plans to use net proceeds from the sale of its New York Royalton and Morgans hotels to clear debt associated with the Delano, which will leave the South Beach landmark free to be sold or used for financing. Morgans had more than $672 million of outstanding debt at the end of 2010, according to filings with the Securities and Exchange Commission, and is seeking to reduce that debt to invest in global management agreements that it believe will be more profitable.
Peter Zalewski, a principal at Bal Harbour-based real estate consultancy Condo Vultures, said Miami-Dade Clerk of Courts records show that several outstanding liens against the Delano recently were resolved -- a move that often signals an upcoming transaction. He said now could be a good time to sell.
"This is a market where buyers are looking for quality, they're looking for a brand, they're looking for an intrinsic value," Zalewski said.
Morgans also operates and/or has ownership in hotels in San Francisco, Boston and London. In Miami, the company holds a 50 percent interest in Mondrian South Beach and a seven percent interest in Shore Club, which is in foreclosure.
Gross said further real estate sales would be considered "over time as long as the economics are right and we can continue to grow our brands."
Already, Morgans has big plans for the Delano and Mondrian brands. The company plans to manage a Mondrian in Doha, Qatar, and Delano hotels in Turkey and Cabo San Lucas, Mexico. All are expected to open in 2013.
The Delano would be an attractive prize for a potential buyer, said Miami-Dade hotel consultant Scott Brush. The hotel commands high rates, even if they've fallen a bit over time. During the first quarter of 2011, for example, the average daily rate was a whopping $585 at occupancy just over 70 percent. That was a 10 percent drop from rates in 2010, but last year's Super Bowl in Miami drove prices up.
"Delano has always managed to have an average rate approximately 100 bucks better than its contemporaries," Brush said. "And a lot of that is the marketing ability. And hotels, when people buy them, they're buying them for their income potential."
To see more of The Miami Herald or to subscribe to the newspaper, go to http://www.herald.com.
Copyright (c) 2011, The Miami Herald
Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com.
More About Your News Being Published on Hotel-Online Inquire Here