In what has been a historically bad year for Central Florida’s hotel industry, Marcus & Millichap’s Miami office has launched a glizty — some might even say audacious — marketing campaign for a pair of recently renovated hotels on Kissimmee’s W192 tourism corridor.
Ahmed Kabani, senior vice president investments, together with associate Luis Garino, have the exclusive listing for the for sale of two boutique hotels: the 220-room Palazzo Lakeside Hotel and 169-room Magic Moment Resort. The combined listing price is $31.5 million.
Both were purchased and renovated by Miami couple Carina Radonich and Ariel Tomat, who put their flair into the $6 million renovations. The couple had completed the Magic Moment project in 2015 and driven occupancy rates to over 95% when they embarked on their second Kissimmee investment, the partially renovated Palazzo overlooking Lake Cecile two years ago.
When they bought the asset in late 2018, just 50 of its 220 rooms had been updated, and the property was operating under the Choice Hotels Ascend flag. Radonich and Tomat opted to stay independent, and completed the renovation to a level that exceeded the brand standards.
“The fact that both properties are unencumbered by a franchise creates an excellent opportunity for buyers who may want to approach these assets creatively and convert them as desired,” Garino said.
He said the owners completed the interior renovations during the shutdown in April and May. “The owners have created a fantastic ambiance inside these hotels,” commented Kabani.
If they’ll get their asking price remains to be seen. A handful of hotels in the Orlando-Kissimmee market have traded hands this year after the onset of the COVID-19 pandemic, including the Castle Hotel, a Marriott Autograph Collection property on South I-Drive in early March.
The timing couldn’t have been worse for HDG Hotels, the Ocala-based owner-operator that had a purchase contract for the Fairfield Inn & Suites at 6073 W. Irlo Bronson Memorial Highway and was scheduled to close in April. While three other hotels in Kissimmee transacted this year, all were designated for residential conversions. The Fairfield, built in 2016, is the only Marriott-branded hotel on W192.
“Our escrow deposit went hard on March 2,” President & CEO Azim Saju told GrowthSpotter. They considered backing out of the deal, but ultimately closed in June for $17.3 million.
“We worked with the seller to extend the closing and to reprice the asset,” Saju said. “The original contracted price was $18.1 million.”
Because of the strength of the brand and past performance, HDG was able to keep its financing in place. “The lender, while they didn’t rescind the loan commitment, they did modify the terms to require more collateral,” Saju said.
Central Florida’s single-asset hotel sales peaked between 2015, when more than 40 assets traded in Orange County alone and another dozen sold in Osceola County. With a booming tourism economy and theme park expansion in 2019, the number of sales began trending down as hotel owners sought to refinance and hold their assets.
This year, many are struggling to remain open — even with federal assistance from the Paycheck Protection Program — as occupancy levels dropped to single digits. Some closed during the shutdown in March and never reopened.
That was the case in the Baymont Inn & Suites at Celebration. Chicago-based T2 Capital Advisors bought the hotel in October and plans to convert it to workforce housing.
“The prior owner spent a lot of money to keep it open,” T2 President and CEO Jeff Brown said. “He closed in March and was never able to reopen. I feel terrible for the state of affairs for hoteliers around the country.”
Saju said he considered backing out of the Fairfield deal but elected to move forward because he loves the area and location, and he’s betting on an Orlando recovery.
“We believe in the resiliency of our country and that market, and that was an important factor in our decision to proceed," he said. HDG received a PPP loan and was able to keep the Fairfield open.
“Demand has picked up since June,” he said. “There’s sprouts of business travel starting to come back, and we’re starting to see some of that demand return. Our occupancy is making modest gains.”
Paul Sexton, vice president of HREC Investment Advisors, said there still are plenty of willing buyers for Orlando-area hotels if they’re priced right. In both of the recent Kissimmee transactions, the sellers dropped their price.
“Sellers are struggling with with how much is my hotel worth, and at what point should I exit the asset,” Sexton said. Banks have been willing to extend forbearance to hotel owners, but those agreements are winding down.
“Those typically lasted for three months, so hotel owners are having to go back and ask for more time,” he said. “We haven’t seen the level of foreclosures you might expect because owners were able to preserve some cash flow.”