South Beach Nightclub Is Priced in Bitcoin — But What About Volatility?

A commercial real estate firm is selling what marketers say is the first nightclub priced in bitcoin and located in Miami-Dade’s South Beach.

And James D. Silver, a partner at Kelley Kronenberg in Fort Lauderdale who is not involved in the sale, said it is important to take into account the volatility on both the buyer and the seller side to avoid potentially costly litigation in these types of purchases.

“If you’re the buyer and you’re paying in bitcoin, and between the time of signing the contract and the time the transaction closes, it goes way up in value or goes way down in value, that’s a risk to the extent there is not an adjustment to the price at closing,” Silver said. “The question for the parties: Are they going to assume that and at the same time have an upside/? Or do they not want to take the risk of that volatility or the risk they get that downside?”

Bitcoin is a cryptocurrency that offers lower transaction fees than traditional online payment options, according to analysts. A decentralized authority operates it, as opposed to government-issued currencies, like the American dollar or the European Union euro.

In this instance, Michael T. Fay, principal and managing director at Avison Young’s Miami office, who is leading the listing on behalf of seller Acqua LLC, is planning to allow a “fluctuation range” in the bitcoin sale of the Treehouse nightclub and the property on which it sits.

“We could take an average of an X date movement, where it would drop below a certain number and the buyer would have to make up the difference or visa versa,” Fay said. “That range also is something that is subject to negotiation for each buyer, based on the risk.”

The turnkey nightclub and event venue is a stand-alone single-story 4,322-square-foot structure on an 8,890-square-foot lot with indoor and outdoor areas. The business also has a 5COP liquor license that typically permits consumption of beer, wine and liquor on the premises until 5 a.m. in Miami Beach. It is currently open five days a week at 50% capacity because of the coronavirus pandemic.

The building is located one block from the beachfront, has inherent property air rights allowing for future redevelopment options, and is within walking distance of several high-end hotels and multimillion-dollar condominiums.

Fay’s client will also accept traditional cash or finance offers. But Fay said the seller has already turned down multiple offers in excess of $15 million for the turnkey nightclub and event venue. Should the transaction be completed in bitcoin, the balance would be kept on a public ledger accessible to anyone with internet access, which adds a form of security to this volatile product.

And there is another reason purchasing the property using bitcoin is appealing to buyers, marketers said.  Many buyers over the last year, who have seen more than a 900% return, will want to allocate their money to safer investments instead of facing a potential downturn on the price of their tokens, they said.

“One of the other aspects we have been talking about is there are a lot of people who own bitcoin or who are early miners that got many coins,” Fay said. “The question is whether they could transfer the coins into a hard asset outside of cash—and this allows for that.”

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