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 Traditionally a Conservative Office Building Investor,
a REIT Acquires the Ritz-Carlton Key Biscayne for $46.3 million and Assumption of $61 million in Debt
By Douglas Hanks, The Miami Herald
Knight Ridder/Tribune Business News 

Apr. 6, 2004 - An investment fund said Monday that it had acquired a majority share of the Ritz-Carlton hotel in Key Biscayne. The resort performed so well during the post-Sept. 11 tourism slump, the fund said, that fund managers had decided to drop their no-hotel policy. 

Jamestown, a fund run out of Atlanta and Germany, said it paid $46.3 million for the 490-room resort and assumed another $61 million in debt as part of the deal. 

"This Ritz has outpaced every other Ritz in the country," said Stacy Woodhouse, an analyst with the Jamestown acquisitions team. "It opened right after 9/11 and still has done very well." 

Boasting an oceanfront location on an island known for high-priced property and exclusivity has boosted the Ritz-Carlton's sales during a difficult stretch for the hotel industry, as the 2001 terrorist attacks soured vacationers to flying, industry watchers said. 

The Key Biscayne Ritz has done particularly well with business groups, allowing it to exceed expectations less than three years after its July 2001 opening, according to PricewaterhouseCoopers analyst Scott Berman. 

"All indications are it's ahead of plan," Berman said. 

The deal, Woodhouse said, gives Jamestown the majority stake in the hotel, with the original owner, G.B. Hotel Partners, retaining a minority share. The company, headed by hotelier Sherwood Weiser, is to continue managing the Ritz-Carlton, and Woodhouse said the new ownership should not affect operations. 

The Ritz-Carlton hotel chain manages the hotel for the owners and collects 3 percent of the month's receipts as its fee, according to a regulatory filing by lender Credit Suisse First Boston. 

Calls to Weiser's office were not returned Monday, and a Ritz-Carlton spokeswoman said Monday night that she could not confirm that Jamestown had acquired a majority share. 

The Ritz is to become part of a $1 billion fund Jamestown would offer investors. It would be the 25th commercial real estate fund Jamestown has sold since its founding in 1983 but the first to include a hotel, Woodhouse said. 

Jamestown's acquisitions team, he explained, usually sees hotels as offering revenue streams too seasonal or sporadic to be good investments. 

The track record reflects what investment banker Ezra Katz describes as a broader reluctance of real estate investors to buy into hotels, which lack the kind of reliable rents found in other commercial properties. 

"They prefer the office buildings and shopping-center and apartment buildings," said Katz, chairman of The Aztec Group in Coconut Grove. 

"Hotels are much more difficult to understand. It's not really a real estate transaction; it's a business transaction." 

The Ritz-Carlton Key Biscayne was one of the first in a batch of luxury hotels to open in the Miami market in the past three years. 

And the Jamestown deal, Berman said, highlights the fact that those properties are doing well enough to catch the eye of investors. 

"The market is doing great," he said, predicting that large investors would begin pursuing the region's other top hotels the same way they've bought up most of the area's large office buildings the past two years. 

"There is a lot of equity out there for buying real estate," Berman said, "and hotels are starting to come back in favor." 

South Florida hotels, he added, are "going to get more attention from prospective buyers. . . . We're at the start of a cycle." 

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(c) 2004, The Miami Herald. Distributed by Knight Ridder/Tribune Business News. MAR, CSR, 


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