South Florida hotel investment heads north
South Florida hotel investment heads north
12 JULY 2018 8:36 AM

Beyond Miami, well-known lodging REITs and private equity firms are investing in the surrounding attractive markets of Broward County, especially Fort Lauderdale.

REPORT FROM FLORIDA—Fort Lauderdale was historically considered a mid-market spring break destination and cheaper alternative to Miami. But now, a new era of hospitality growth and development has arrived—north of Miami—in Fort Lauderdale.

In recent years, Miami development sites in general have yielded higher land prices and stricter development approvals; and beachfront sites have become less available than previous decades.

Furthermore, in 2016 and 2017, the Miami market softened, due to impact on tourism from the Zika virus, new supply additions, economic and political challenges in key Latin American feeder markets, hurricane-related disruptions and the temporary closing for renovation of the Miami Beach Convention Center, among other influences.

Although domestic and international investors poured billions into Miami’s hotel market over the past few years, and will continue to do so going forward, transactions have decelerated since early 2017 due to pricing disconnects between buyers and sellers.

Thus, investors and developers seeking higher yields have ventured north, mainly to Fort Lauderdale, for luxury resort/residential and mid-priced hospitality developments, focusing less on Latin American travelers and more on domestic and other international markets.

Real estate investment trusts like DiamondRock and Summit, and private investment/development firms, such as Brookfield and KSL, have invested billions into the Fort Lauderdale hotel market. These hotel investors are capitalizing on the market area’s strong fundamentals, and they are creating value through developing, renovating and expanding key projects with experienced local development partners, operators and other service providers.

Why are investors venturing into Fort Lauderdale?

Investors are generally attracted to other areas of South Florida, specifically Fort Lauderdale, based on the following drivers:

1. Strong hotel operating performance and air passenger visitation growth

  • According to data from STR, RevPAR increased 9.2% for the six-month period from September 2017 to February 2018, despite Hurricane Irma and primarily driven by healthy increases in average daily rates. (STR is the parent company of Hotel News Now.)
  • Air passenger arrivals were up 9.6% in year-to-date May 2018, according to the latest airport statistics.

2. Less barriers to entry with more land sites available at lower prices and fewer development limitations

  • Historically, Fort Lauderdale property prices versus those in Miami are about 30% less for comparable products.

3. Major infrastructure improvements and investments

  • The multibillion-dollar current expansion of the Fort Lauderdale-Hollywood International Airport;
  • the upgrades at Fort Lauderdale’s Port Everglades, the world’s largest and busiest cruise port;
  • the recently inaugurated Brightline high-speed train connecting Miami to West Palm Beach;
  • the planned expansion of the Greater Fort Lauderdale Convention Center; and,
  • the upcoming launch of All Aboard Florida’s rail service to Orlando.

4. Healthy mix between leisure and business travelers with multiple attractions and demand generators

  • Although about 75% to 80% of visitors are classified as leisure, Fort Lauderdale contains more than 7.5 million square feet of class-A office space and strong business and professional services’ tenants.

5. Wide availability of skilled labor with lower operating costs

  • Fort Lauderdale achieved about 2% labor growth with roughly 3% gross operating profit growth in 2017, according to STR’s 2018 HOST Almanac report.

Undoubtedly, these five drivers make Fort Lauderdale a very competitive and attractive market. In fact, PwC ranked Fort Lauderdale sixth among 78 U.S. markets to watch in its “Emerging Trends in Real Estate 2018” survey for overall real estate investment and development prospects. The market experienced the largest upward move in the latest survey, improving 29 spots from the previous year.

Although Fort Lauderdale was historically considered a lower-priced, attractive alternative to Miami, today, the city is flourishing with a unique identity.

According to May pipeline data from STR, there are 12 hotel projects with 1,719 rooms under construction in Fort Lauderdale, generally divided among luxury and mid-priced segments.

Fort Lauderdale is being transformed with beachfront high-rises and luxury resorts with branded residences. Over the past decade, various important condo-hotel projects were developed in Fort Lauderdale, including a Ritz-Carlton, W Resort and a Conrad.

Undoubtedly, these prestigious brands improved the products, service levels, destination appeal and operating performance of hotels in the destination.

As a result, several other new luxury resort/residential developments are underway, including a Four Seasons Hotel and Private Residences and an Auberge Beach Residences & Spa Resort.

While Fort Lauderdale residential sales to foreign buyers have slowed due to the stronger U.S. dollar and economic woes in key buyer markets, the majority of purchasers are from the northeast area of the U.S., attracted by the lower densities, property prices and living expenses.

Numerous single-branded, mid-range hotels are being developed nearby the Fort Lauderdale-Hollywood International Airport and other key locations, such as the nearby Las Olas Boulevard, including proposed projects under the AC, Aloft, Centric and Tryp lifestyle brands.

Larger, dual-branded projects include:

  • Wurzak/DoveHill’s 323-key Element and Tribute hotels within a design-driven high-rise in downtown Fort Lauderdale with retail, restaurant components and a premier rooftop bar/club;
  • Driftwood/Merrimac’s 202-key Tru and Home2 Suites by Hilton hotels with retail amenities; and
  • Kimco/Master/Salzman’s 350-key AC and Marriott hotels, which are part of the Dania Pointe—a 102-acre mixed-use development with retail and restaurants, in addition to class-A offices, luxury apartments and public event spaces.

What these luxury and mid-priced developments have in common are:

  • local or regional development firms partnering with institutional joint venture equity partners;
  • mixed-use projects with new restaurants, experiential retail offerings and residential components;
  • affiliations with premium brands and newer lifestyle concepts;
  • cosmopolitan and contemporary designs inspired by urban resort living and incorporations of local architectural heritages such as Mediterranean influences; and
  • use of local talented service providers such as architects, interior designers and operators.

Many experienced private and public investors believe deals are available at more attractive prices compared to other top 25 markets for both full-service and select-service assets in the Fort Lauderdale area.

Over the past four years, private equity and real estate development firms have made sizable property investments, including:

  • Brookfield’s $171-million recent purchase of the 589-key Hilton Fort Lauderdale Marina (notably, Brookfield also owns the 998-key Diplomat Resort & Spa in Hollywood, which it purchased in mid-2014 for $500 million-plus before renovations and a conversion to Hilton’s Curio collection);
  • KSL’s $190-million acquisition early this year of the 349-key Margaritaville Hollywood Beach Resort (which represents the company’s re-entry into the market three years after it sold the 393-key Royal Palm South Beach to Chesapeake Lodging Trust for $278 million);
  • Heafey’s $100-million procurement of the remaining condo-hotel units of the Conrad Fort Lauderdale Beach Resort in early 2017;
  • Tavistock’s $165-million deal for the iconic 384-key Hyatt Regency Pier Sixty-Six Hotel and Marina in Fort Lauderdale in late 2016;
  • Carlyle/InSite’s $107-million late-2014 purchase of the 487-key Yankee Clipper Sheraton Fort Lauderdale Beach Hotel, which the company has recently renovated and converted into the B Ocean Resort, now for sale and expected to trade for $200 million-plus; and
  • Tate/Rok’s mid-2014 acquisition of the long-term leasehold interest on the iconic Bahia Mar Resort & Marina in Fort Lauderdale for an undisclosed price, with plans to upgrade and expand the waterfront property with shops, restaurants and residential units. After years of controversy and debate, the company recently obtained approvals for the redevelopment, including 250+ hotel rooms, 650+ rental apartments, retail, office, parking, boating amenities and a marina village component with an outdoor promenade.

Commonalities among these private equity-funded deals include complex investments with multiple components (for example, marinas, residential, retail and offices) and, in some cases, excess land with multiphased development potential.

Additionally, some of these purchases of older iconic assets, like the Yankee Clipper or the Pier Sixty-Six, involved significant renovations or changes in branding and/or management to maximize performance and create value.

Lodging REITs are also bullish on South Florida, with numerous deals consummated in Miami, the Florida Keys and, particularly, Fort Lauderdale over the past four years:

  • Summit Hotel Properties paid $83 million for the 261-key Courtyard Fort Lauderdale Beach in 2017.
  • Sotherly Hotels fully acquired the 311-key Crowne Plaza Hollywood Beach Resort for $88 million in 2015 and subsequently renovated/converted it to the Doubletree brand.
  • Chatham Lodging Trust bought the 105-key Residence Inn Fort Lauderdale Intracoastal for approximately $31 million in 2015.
  • DiamondRock Hospitality purchased the 432-key Westin Beach Resort & Spa Fort Lauderdale for $149 million in 2014.

While all of these lodging REITs have completed deals in dissimilar time periods, with disparate physical conditions and characteristics, divergent operational performances and differing locations and sub-markets, key executives have cited attractive risk adjusted returns for high-quality premium-branded hotels with expected outsized market growth, as well as the potential for longer-term incremental value.

Currently, several trophy properties are for sale, signaling strong investor interest and appeal for the area.

In short, but perhaps for the long game, South Florida, especially Fort Lauderdale, is looking good.

Jonathan Kracer is Managing Principal of SION CAPITAL LLC, a hospitality and real estate consulting and investment firm focused on the North American, Latin American, and Caribbean regions. He is a recognized expert on the hospitality sectors of South Florida, Latin America, the Caribbean, and Mexico. He has been a columnist with HNN since 2012 and can be reached via email at More information about SION CAPITAL LLC can be found at

The assertions expressed in this article do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please feel free to comment or contact an editor with any questions or concerns.

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