334-Room Gansevoort Pegged for Auction

MIAMI-Despite its reputation as a celebrity hangout, Gansevoort South, a 334-room luxury hotel, is headed to the auction block. The Miami Herald reports that lender Credit Suisse has an $89 million mezzanine loan on the oceanfront hotel.

Located at 2377 Collins Ave., the hotel and adjoining residential towers enjoyed celebrity buzz as guests such as Michael Phelps and retired NFL star Warren Sapp stayed there, while rapper Ludacris used the hotel as one of two spots to promote Conjure, his cognac. But owner/developer William and Michael Achenbaum’s difficulties in selling the condo hotel units created financial difficulties in that revenue was not obtained to pay off the massive Credit Suisse debt.

This is not impacting the current operations of the hotel, however. According to Michael Achenbaum, President of Gansevoort Hotel Group in an e-mail to GlobeSt.com, “Operations at Gansevoort South hotel remain status quo; we will continue to create memorable experiences for guests and provide the highest level of service. STK restaurant will open at the hotel in the coming weeks followed by an impressive New Year’s Eve celebration on the rooftop.”

The e-mail also states that “Gansevoort South Hotel, Spa and Residences’ ownership has been attempting to negotiate an amicable resolution with its lenders. Sandy Lane Developer, LLC, the Owner, is continuing such efforts with its lender Credit Suisse and its affiliates and is currently negotiating in good faith to buy the outstanding debt, thereby retaining ownership.”

Robert M. Taylor, CB Richard Ellis senior vice president, hotels, says the Achenbaum’s situation is similar to that of many investors who bought hotels at the height of the condo craze, converted them to condo hotels, then tried to sell them. “The developers felt they could sell them at a large profit,” says Taylor, who is familiar with Gansevoort South, but has not been directly involved with the asset. “There was a time during which some of the properties over on the beach were getting anywhere from $1,500 to $1,800 a square foot.”

But when the market catered, the developers were left with unsold units. Taylor tells GlobeSt.com that coupled with that, more luxury hotels were coming online, creating even more competition. And, to top it off, visitors to Miami have declined, especially international visitors.

There are some positives, however. “Historically, Miami is second only to Manhattan in ADRs,” Taylor comments. “Miami was one of the last markets to be hit hard from the financial crisis, and I believe that Miami will be more responsive to recovery than other markets when the time comes.”

Read more about the Gansevoort South foreclosure here.