SOUTH BEACH, FL—An affiliate of KSL Capital Partners, LLC (KSL) has sold The James Royal Palm resort here to Chesapeake Lodging Trust for a purchase price of $278 million, or approximately $707,000 per key.
Chesapeake Lodging Trust has entered into a new management agreement with HEI Hotels & Resorts to operate the hotel and a new franchise agreement with Starwood Hotels & Resorts and will be affiliated with Starwood’s new brand for independent hotels.
“We are thrilled to announce our entrance into the Miami-South Beach market with the fee simple purchase of The Royal Palm,” stated James L. Francis, Chesapeake Lodging Trust’s president and CEO. “We have been looking for the right situation and are delighted to have found a high-quality, fully renovated asset in an outstanding location and with tremendous operational upside.”
The Royal Palm offers 393 guestrooms averaging approximately 426 sq. ft., including 164 suites and 141 rooms offering ocean views. Each room offers a contemporary open layout with upscale residential elements and a 42-in. flat screen television, wireless HSIA, custom artwork and a work or dining area.
The hotel features several food and beverage outlets. The Florida Cookery is the hotel’s three-meal restaurant and serves regional Florida cuisine offering both indoor and outdoor options. The lobby lounge bar features light fare with a focus on cocktails at night and transforms into a coffee bar during the daytime. The South Shore lounge is located on the ground floor of the Lanai building and offers a full bar and a small plates menu.
Byblos, The Royal Palm’s featured restaurant, is located on the first two floors of the hotel’s Shorecrest building. The Mediterranean cuisine concept is operated by INK Entertainment via a 10-year lease arrangement with the hotel. Byblos is currently under construction by the tenant with a planned opening in April 2015. The two-story space features 150 restaurant and bar seats, a 30-seat outdoor patio, and a 2,000-sq.-ft. private dining and lounge room that can be used for flexible meeting space and private events.
The hotel has approximately 5,700 sq. ft. of dedicated meeting and banquet space throughout six different meeting areas. There is also an additional 16,000 sq. ft. of flexible outdoor meeting space via multiple patios and decks. Other amenities include a full-service spa, a fitness center, two separate swimming pools, and access to a private Royal Palm beach area with 300 chaise lounges and day beds along with beach side bar services.
From 1998 through 2002, The Royal Palm underwent a major redevelopment and reconstruction project to bring the resort up to modern building codes and standards, including the construction of the two 17-story towers, resulting in the nearly 400 rooms. Starting in 2010 and completing in late 2012, a comprehensive renovation with a cost of approximately $50 million was completed.
“The hotel is in excellent shape and conveys the contemporary feel of South Beach,” stated Francis. “We will execute upon our business plan that includes minor changes to the product offering, but we anticipate no disruption as we reposition the property.”
The Trust has entered into an interim franchise agreement with Starwood, under its Luxury Collection brand. The Royal Palm will then migrate to Starwood’s new brand upon its roll out and will be the first in this new soft brand, which is anticipated to occur within the next 60-90 days.
The Trust funded the acquisition with available cash on hand, a borrowing under its revolving credit facility and by obtaining a $125 million two-year term loan. The term loan was provided by Wells Fargo Bank, N.A., and subject to customary conditions, provides for a one-year extension. The loan is secured by The Royal Palm-Miami South Beach and bears interest equal to LIBOR, plus 2.40%. Contemporaneous with the closing of the term loan, the Trust entered into an interest rate swap to effectively fix the interest rate for the original two-year term at 3.34% per annum.
“We are grateful to have been a part of the long history of The James Royal Palm,” said Bernie Siegel, a principal of KSL. “For nearly four years, we were able to transform it into one of the preeminent hotels in Miami, thanks in large part to the tireless efforts of the Royal Palm staff.”
KSL originally acquired the Royal Palm in 2011 and completed an extensive renovation and repositioning of the property in 2011 and 2012. The fully renovated property was reintroduced to the market in December 2012.