(This story, in slightly different form, originally appeared in ALM's Daily Business Review.)
MIAMI-Consultatio S.A., an Argentine development group, has acquired Key Biscayne's Sonesta Beach Hotel property for $78 million, a deep discount from its 2005 value of $120 million. Consultatio and affiliate Key Biscayne Consultatio plan to demolish the 40-year-old hotel and build a 165-unit ultra-luxury condominium when the high-end housing market rebounds.
SBR-Fortune Associates, a partnership between Fortune International and Boston-based Sonesta International Hotel Corp., sold the 10.6-acre property less than two weeks after signing the contract with Consultatio. The Miami-Dade County property appraiser values the site at $44.5 million, compared with $48.9 million a year ago.
The sale is one of South Florida's priciest deals of the year. Despite the global recession that has curtailed dealmaking, South American developers and investors are in a "good financial position," says Manny de Zarraga, executive managing director with Holliday Fenoglio Fowler in Coral Gables. His team, including Daniel Peek, Dan Carlo, Jaret Turkell and Luis Castillo, marketed the property on behalf of the seller.
"In general in South America, there's always been very little mortgage debt available to build projects, unlike in the United States, where most developers have had the benefit of having a lot of mortgage debt," de Zarraga says. "So developers in South America finance [projects] with their own cash and typically have very low amounts of debt."
Consultatio is an active developer in Argentina. In addition to building high-rise condos and suburban communities, the publicly traded company manages rental apartments and office buildings, according to its Web site.
Sonesta International will receive about $11.5 million from the sale, after paying closing costs, commissions, expenses and the mortgage, according to a recent filing with the Securities and Exchange Commission.
The deal is a blow to developer Edgardo Defortuna. He paid $30 million in 2005 to partner with Sonesta, says Boy van Riel, an executive with Sonesta International. Defortuna also became responsible for a portion of a $61 million mortgage that SBR-Fortune took on the hotel in 2005, according to Miami-Dade County property records.
After deducting Sonesta's $11.5 million, paying off an existing mortgage of about $58 million and covering the expenses, there is little left for Defortuna. "Given the current market conditions, selling the Sonesta project was a win-win for everyone involved," Defortuna stated in an e-mail.
Almost a year after creating SBR-Fortune, the partners closed down the 294-hotel to redevelop the site at 350 Ocean Drive. The partners won city approval to build a 165-unit condo high-rise in 2007, but the deteriorating housing market stalled their plans.
SBR-Fortune obtained a demolition permit to keep the site-plan approval alive, says James Shindell, chair of Bilzin Sumberg's Real Estate Group in Miami, who represented the seller. "If they abandoned the property for a period of time, they may lose the [site plan] approval," he says.
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