|By Douglas Hanks III, The Miami Herald,
The Miami Herald
Knight Ridder/Tribune Business News
Dec. 20, 2005 - Six months after giving up the reins at the Delano and the Shore Club, famed hotelier Ian Schrager bought a hotel located between the two in South Beach.
Last week a Schrager company purchased the Riande Continental, as well as its sister property in Miami, Schrager and a broker for the Riande family confirmed Monday.
The deal marks Schrager's quick return to a lodging market he helped define when the Delano opened 10 years ago as one of the first stark and stylish "boutique hotels" on South Beach.
Schrager insisted his new budget-oriented hotels won't compete with the Delano or the Shore Club, two pricey hotels run by his old company, Morgans Hotel Group. Through Morgans, Schrager owns stakes in both hotels and remains a consultant with the company. He stepped down as Morgans chief executive in June.
For now, Schrager seems eager to downplay his new venture. "It's not something I'm going to be involved in," he said. "I really have no plans to run it. . . I'm investing in it as real estate."
But the proximity of the Riande to Schrager's old hotels -- directly next to the Shore Club and two blocks north of the Delano -- makes for some close quarters. And a spokesman for Philips Hotel Group, which owns the Shore Club and pays Morgans to manage it, didn't sound conciliatory Monday.
"Philips Group manages Bryant Park [Hotel] in New York in competition with other Schrager properties and outperforms them all," said spokesman Larry Winokur. "They enter this in the same spirit."
For now, the cut-rate Riande offers no competition to the Shore Club or the Delano, two of South Beach's priciest hotels. Schrager said the 251-room Riande collects less than $100 a night for an average room, far cheaper than the average rates Morgans reported this year for the Delano ($482) and the Shore Club ($345), where Morgans owns a 7 percent stake.
"My initial reaction is there's room for all of them," said Scott Berman, a Miami-based hotel analyst for PricewaterhouseCoopers. "I think we've got to know what [Schrager is] going to do with it. It's all about the positioning and, ultimately, who you're targeting."
Schrager's consulting contract with Morgans, worth $2.25 million plus bonuses through 2007, doesn't bar him from competing with the company he founded in 1983. The two-year agreement, which Morgans disclosed as part of a planned stock offering, provides Schrager an allowance for private jet travel, salaries for a full-time driver and secretary and free stays at Morgans hotels for his family and associates.
The IPO documents also highlight the financial challenges facing a company once known as Ian Schrager Hotels. Morgans has posted a loss every year since 2001, including a $29.1 million deficit as of Sept. 30. The company blames the losses mostly on interest payments for its $660 million debt, which is partly secured by the Delano.
Schrager said he bought the Riande properties with a partner, New York-based developer Aby Rosen, and that Rosen will take the lead in the venture.
The Panama-based Riande hotel chain sold its three U.S. properties to the Schrager group for an undisclosed price, said broker Rob Koger, who represented the Riandes for Molinaro Koger in McLean, Va.
The portfolio includes the Miami Riande Continental on Biscayne Boulevard, near Bayside Marketplace, and the Riande Continental Plaza in Orlando. Schrager said the 190-room Orlando hotel would probably be sold off.
The 247-room Miami Riande could give Schrager a foothold in the city's booming condominium market. A number of high rises are underway downtown near the Riande, including some on old hotel sites.
In the past, Schrager has expressed interest in entering Miami's residential. Rosen's company, Aby Rosen, is a partner in the effort to build residential towers on The Miami Herald property and a W condo-hotel on Miami Beach's 22nd Street.
Schrager didn't say whether he planned a condominium component for either of the Miami-area hotels.
Copyright (c) 2005, The Miami Herald
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