Sep. 3, 2006 - At an age when many businessmen are dreaming of retirement to South Beach or Cabo San Lucas, Chicago's Larry Levy, long a mover and shaker in restaurants and commercial real estate, is diving into the luxury hotel business in those chic locales.

The 62-year-old entrepreneur this week will announce the $32 million revival of The Fairfax, a shuttered art deco-style hotel on a swank strip in South Beach in Miami. Media darling Todd Oldham, a partner in the project and veteran of another successful South Beach rehab, has designed every aspect of it, down to the bedding and china.

And Levy's first foray into hotels involves another first.

The restaurant in the 53-suite fractional ownership hotel will be Enoteca Spiaggia, the first export of the Spiaggia name since the crown jewel of the Levy restaurant empire was born in Chicago 23 years ago. Tony Mantuano, the acclaimed chef and partner of Spiaggia, will be chef and partner at the offspring restaurant as well, whose Italian name translates to "wine bar at the beach."

In a second venture, Levy has agreed to buy a 50 percent stake in Esperanza, an elite seaside resort in burgeoning Cabo San Lucas, located at the southern tip of Mexico's Baja California peninsula. Auberge Resorts, the operator and a minority owner, has agreed to raise its stake, taking control of the other 50 percent. Levy declined to disclose terms of the deal, which is expected to close this month.

"Resorts are something I've always wanted to do, using my real estate and my restaurant skills," Levy said in an interview last week. "I love resorts. I don't know another way to say it. It's one of my passions. I spend a lot of time in resorts."

In each case the properties are relatively small. But the potential to make a big splash--or to belly flop--is considerable. But the prospect of failure is unlikely to prove daunting to Levy, observers say.

"Levy always had an uncanny ability to target markets," said Ace Lanahan, vice president with Philipsborn Co., a Chicago mortgage banking firm. "He was never bashful when setting sights on the high end."

Creating a distinctive style and bringing in a strong hotel operator will be key in South Beach, where the property at 18th and Collins Avenue has some formidable neighbors, including the Ritz-Carlton South Beach, the Delano, the Setai Hotel and the Shore Club.

"There needs to be real flair to the operation of the property," said Scott Brush, a Miami-based hotel consultant. The Delano, for instance, probably can charge $75 to $100 more per night than a standard hotel because of the involvement of entrepreneur Ian Schrager, he said.

The Levy partnership will bring in an outside firm to manage the hotel when it opens in the fall of 2007, but has not yet named the company.

And it is counting on Oldham and Mantuano to inject a distinct style--inspired by the name Spiaggia, which means beach. Oldham's restoration of the former Tiffany Hotel, also on Collins Avenue, into The Hotel won high praise. Its restaurant, Wish, has also been recognized, as has Mantuano, who last year was named best chef in the Midwest by the James Beard Foundation.

The color palette will feature neutrals, with honey-colored woods and accents of blue, along with Italian tiles and veneers suggestive of the Amalfi Coast.

And the restaurant will be authentically Italian, like Spiaggia in Chicago, but with a playful twist, said Mantuano.

"There will be different ways to eat, like the mozzarella bar, which doesn't exist in Chicago," he said. Patrons who prefer to graze rather than sit for a full-course meal will have the option of sampling an array of hand-crafted regional cheeses, paired with seasonal vegetables such as heirloom gold tomatoes or roasted eggplant.

The hotel's 53 suites will be available in one-quarter ownership interests, which entitles owners to 13 weeks a year at the Fairfax. Or they can swap the time for stays at other properties through the Registry Collection, or put unused time into a rental program. Fractional sales are expected to be offered in November, and to average $300,000, which includes access to the pool and private dining club on the roof, a private beach club just across Collins Avenue and a health club and spa.

"That's not unreasonable," said Hank Cairo, president of Resort Capital Advisors Inc. of Ft. Lauderdale. "That's an area that's been fairly redeveloped. It's a good area."

And the Miami hotel market has remained strong, in spite of last year's series of hurricanes, said Ted Mandigo, an Elmhurst-based hotel consultant. As a destination for tourists from Latin America and Europe, as well as the United States, it gets good traffic throughout the year.

Still, Cairo had some reservations about the $32 million estimated cost for purchase and redevelopment of the property, which works out to about 50 percent of the $63.6 million that would be raised if all units sold out.

More typically, such costs should run 40 to 42 percent, he said.

The higher cost is fitting because "this is an exceptional high-end product," said Ben Weprin, managing partner of Levy's real estate endeavors, which are separate from Levy Restaurants. "Every piece of furniture is custom-designed, the kitchens have dishwashers and espresso machines . . . and Sub-Zero refrigerators."

Levy's second deal is for a property that is already luxurious to the max.

Just named the No. 3 international resort by Andrew Harper's Hideaway Report, the 17-acre Esperanza property overlooks two private coves on the Sea of Cortez. Opened in 2002, it has played host to the likes of Paul McCartney, Gwyneth Paltrow and Chris Martin as well as Will Smith and wife Jada Pinkett Smith.

In the peak season its 50 rooms range from $875 to $1,250 a night, and the 63 villas in its private residence club can go for $2,500 to $4,000 a night.

Right now the Cabo hotel market is hot, but so is the level of competition--and it's only going to get hotter.

The ultralux market already includes Las Ventanas and One & Only Palmilla, where renowned Chicago chef Charlie Trotter has a signature restaurant. A Ritz-Carlton has been proposed for some time, and there are four to six other planned communities in the development pipeline that are likely to feature luxury hotels, said Bruce Goodwin, a resort real estate consultant specializing in Mexico and other destinations in Latin America.

"It's a given, because that's the hook to sell high-priced real estate," said Goodwin, a partner at Goodwin & Associates, based in San Diego and Mexico City.

Levy plans to add some upper-end units, and to double the size of the spa. And Weprin, his right-hand man, expects that the resort's cachet will only grow over time.

"I was there two weeks ago and met a guy who had been there 16 times," Weprin said. "It's becoming a landmark in Cabo."

Levy, himself, is something of an institution in Chicago.

He remains chairman of Levy Restaurants, the Chicago-based unit of British food-service giant Compass Group PLC, acting as an idea man and rainmaker. The company started in 1978 when he and his brother, Mark, opened D.B. Kaplan's Delicatessen in Water Tower Place. Earlier this year Compass paid $250 million for the 51 percent of the company it had not already purchased in 2000.

Separately, Levy has had an extensive career in commercial real estate in Chicago and its suburbs. His projects have included One Magnificent Mile, the Chicago Mercantile Exchange Center, River Bend and One South Dearborn, among others. The next chapter in this realm will be luxury hotels, and perhaps a luxury hotel brand, though no decision has been made on that yet.

No one's setting timetables, at least not publicly.

"Because all of our assets are unique and intrinsically special and we never know when one will become available," said Weprin. "We are not going to just purchase new properties to expand. It will be very strategic and consistent with our two current properties."

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