The Weekly Dirt: Lifting the curtain on top Four Seasons’ performance

Fort Partners secured a $410 million refi for its top two performing Four Seasons hotels in South Florida. 

The ability to secure such a large loan, especially for hotels, is good news for the developer and points to overall confidence in the market. But like anything else these days, it’s not necessarily an indicator that we’ll see more big refinancings like that in the near future. 

The commercial mortgage-backed securities loan replaces previous debt and provides $56.5 million in cash proceeds for Fort Partners, the Miami-based firm led by Nadim Ashi. The loan backs the Four Seasons Resort in Palm Beach and the Four Seasons Resort at the Surf Club in Surfside. Credit rating agency DBRS Morningstar, which issued a report on the loan, called the hotels “the epitome of luxury” and among the top resorts in the state and the country. 

Both are oceanfront properties (totaling 309 keys) that benefited during the pandemic from a dramatic increase in average daily rates and revenue per available room, key metrics for the hotel industry. 

For the fiscal year ending July 31, the ADR at the Surfside property, which is newer and secures higher rates, was $2,600 with revPAR at $1,600. 

But occupancy rates, which shot up in 2021, have fallen. Rates and revPAR are also declining year-over-year. Paul Weimer, a top hotel broker, recently told me that average daily rates are “not where they were” a year ago. High interest rates and uncertainty about a potential recession are not helping either. (The rate for the Four Seasons loan is fixed at 8.7 percent.) 

Still, rates are higher than they were pre-pandemic.

Morningstar’s 46-page report on the loan sheds like on other potential headwinds, as well. Morningstar values the hotels at $450.3 million, though the lender’s appraisal firm gave the hotels a much higher valuation of nearly $800 million. 

Insurance is one major issue for owners of existing hotels and those planning new projects (the latter of which few exist). 

Insurance costs for the properties have increased more than 225 percent since 2019. Fort Partners is required to maintain at least $75 million of wind/named storm coverage. You may or may not recall that earlier this year, the owner of the Biltmore Hotel had to temporarily reduce its windstorm coverage to $50 million, half of the $100 million it is required to have in its lease with the city. 

“Insurance rates are killing the market,” another commercial broker told me on Friday.

What we’re thinking about: One credit rating agency downgraded Brookfield’s loan for a Pembroke Pines mall, while another watchlisted the loan due to a drop in operating performance, cash flow and other challenges. Will the retail market improve, and what other properties might be in trouble? Send me a note at kk@therealdeal.com. 

CLOSING TIME 

Residential: Retired baseball player turned real estate investor Alex Rodriguez sold the waterfront lot at 14 Star Island Drive back to billionaire hedge funder Ken Griffin for $45.5 million. 

Commercial: Affiliates of Alliance Partners HSP sold three warehouses within the Landmark Commerce Center in West Palm Beach for $43 million. Arden Group bought the properties at 1100, 1300 and 1500 North Mango Road.

— Research by Adam Farence

NEW TO THE MARKET 

A condo at Apogee in South Beach hit the market for $23 million. A trust paid $14.2 million for unit 1504 at 800 South Pointe Drive last year and tapped Jill Hertzberg of The Jills Zeder Group at Coldwell Banker to sell the 4,157-square-foot corner unit. The condo has three bedrooms, three and a half bathrooms, a 2,400-square-foot wraparound terrace and comes with a two-car garage with storage.

A thing we’ve learned 

The phrase “Ponzi scheme” is named after Charles Ponzi, an Italian immigrant who fled Massachusetts to avoid a second prison sentence and ended up in… Jacksonville, Florida where he set up a fake business to sell “prime” property in Florida that was really just swampland. Sound familiar?

Elsewhere in Florida 

• Jeffrey Siskind, who is running to become the state’s next attorney general, is facing at least one Florida bar complaint and possible ethics violations, according to an investigation from the Palm Beach Post. The Wellington-based attorney, who is married to councilwoman Tanya Siskind, has racked up debt and faces foreclosure of his family home, while he is also at the center of allegations that he orchestrated a failed plan to flip a multimillion-dollar house and allegedly stole a house from under the family of a convicted felon who ran one of the biggest pill mill operations in the country. 
• More Californians moved to Florida and Arizona than Texas last year, according to the Associated Press. More than 50,000 former Californians moved to Florida in 2022, compared to 37,000 the year prior. 
• Former Florida Rep. Joe Harding was sentenced to four months in prison after pleading guilty to charges of wire fraud, money laundering and making false statements, Tampa Bay Times reports. Harding, an Ocala Republican who co-sponsored the “Don’t Say Gay” bill, provided false information to the Small Business Administration while applying for business loans during the pandemic.