|By Pat Beall, The Palm Beach Post,
Fla.McClatchy-Tribune Business News
Aug. 3, 2006 --PGA National Resort & Spa, the centerpiece of the sprawling PGA residential community and one of the country's better-known golfing destinations, is being purchased by a Chicago investment firm.
In a memo to employees dated July 28, PGA National developer E. Llwyd Ecclestone wrote that Walton Street Capital LLC will take over golf and hotel operations effective Aug. 16.
Rumors have circulated for months that the sale of the resort in Palm Beach Gardens was imminent.
There is speculation that landing the Honda Classic golf tournament, which starts a six-year run early next year, helped raise the price. The sale price was not disclosed.
Jeffrey Quicksilver, who heads acquisitions for Walton Street, declined to discuss the pending deal until the sale closes.
However, Ecclestone's letter, which went to several hundred employees, hints at changes planned by the new owners of the 25-year-old property. "They have shown a willingness to invest capital" in the high-profile resort.
"It is certainly in need of being upgraded," said Sonny Maken of The Maken Group Inc., a Palm Beach commercial real estate brokerage specializing in hotels and resorts.
With its ritzy club, championship golf courses and acres of open space, PGA National was at the top of its game when it opened for business in 1981. It includes the hotel, five 18-hole golf courses, a 40,000-square-foot spa and a 34,000-square-foot conference center. It recently updated all 339 hotel rooms and corridors, changing everything from bed linens to bathroom marble. The spa sports a refurbished lounge; the health club has new plasma TVs with individual headsets.
But other areas are the worse for wear.
"It was like I had stepped back into 1950," said local real estate broker Rebel Cook, who recently lunched at the resort's private golf club.
Cook praised the resort location and described the surrounding residential real estate as undervalued, but said, "It needs to be brought into this century." Her lunch dessert, she noted, came from a soft-serve yogurt machine. "I thought, 'Am I at a Golden Corral?' " PGA also suffers from an "identity crisis," Maken said. "Is it an upscale golf resort, or is it a spa, or a midscale resort, or a hotel? If someone can come in and redesign, and give it a new identity and do some marketing, it can be a very, very valuable property."
That just so happens to be Walton Street's strong suit: buying undervalued properties, injecting cash for renovation and then selling them within five to 10 years at a tidy profit. Generally, Walton shoots for an 18 percent return. That's why it has amassed a $3 billion-plus portfolio. It also has demonstrated a willingness to spend money early.
St. Petersburg's Renaissance Vinoy Resort is a good example. "We are in the midst of a $3.5 million renovation under their ownership," General Manager Russ Bond said. Since Walton purchased the 1925 resort last year, he said, "we are renovating our main restaurant, our lobby bar, a significant portion of our meeting space and residential suites and our resort shop."
That's just the hotel. Another $3.5 million is going into reconstructing the marina, destroyed last year by Hurricane Dennis, Bond said.
Walton also knows how to take profits. The 2004 sale of the Merrill Lynch Financial Center on Fifth Avenue in Manhattan for $353 million commanded $793 per square foot, at the time the highest per-square-foot price paid for a Midtown tower -- and a reported $87 million return on investment for Walton.
It might not take long to recoup the firm's local investment. Even before 85 million tourists descended on Florida last year looking for places to park their toothbrush and suitcase, investors were bullish on Florida hotels.
Today average room rates are at a five-year high, broker Maken said. "I remember when I could go to a resort for $150 a night, and now in summer I pay $400 for obstructed parking lot views."
A little serious renovation at PGA Resort, Cook added, and "someone else will see it and appreciate the value."
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