The Fort Lauderdale projects are part of a wave of investment in Broward topping a billion dollars of hotel upgrades and new lodgings. The bulk of the upscale projects include condominiums, reflecting the demand for beachfront residences as well as the difficulty in securing financing for hotel-only deals.
Related Group has two projects underway: Hyde Resort & Residences in Hollywood, scheduled to open at the end of 2016 with 40 condo and 367 resort units, and Beachwalk, a 300-unit condo-hotel expected to open in the next couple weeks in Hallandale Beach.
Travel research firm STR says 54 projects with 8,910 rooms are in construction now, with 117 more projects encompassing 13,185 rooms in the final planning stage. Another 14,778 rooms — 54 more projects — are in the planning phase.
Developers say their interest is spurred by major infrastructure improvements in the county, including a $2.3 billion expansion at Fort Lauderdale-Hollywood International Airport that added a runway and will rebuild an entire terminal. International traffic at the airport increased 26 percent last year and brought new airlines including Azul, Copa and Norwegian. Upgrades at Port Everglades, which already hosts the world’s two largest cruise ships, and the eventual addition of All Aboard Florida’s rail service to Orlando are also encouraging investment.
“Right now the entire destination is seeing an economic boom,” said Nicki Grossman, president and CEO of the Greater Fort Lauderdale Convention & Visitors Bureau. “We have committed public money into the expansion of the airport, the expansion of Port Everglades and the main drivers of tourism. We just upgraded the whole product. That’s what’s driving interest.”
In 2014, Broward hotel occupancy reached an all-time annual high of 77.9 percent, while room rates climbed 6.4 percent to more than $127 a night, the highest since 2007. Both measures showed large increases this January and February, a period when the number of passengers traveling through Fort Lauderdale’s airport shot up more than 10 percent.
Grossman acknowledges that Broward got a huge boost from the nasty winter weather in key feeder markets up north. But she said the cash flowing into new hotel projects or redevelopments in the region shows a whole new level of interest.
“We’re nearly at $1.5 billion — b b b billion — in investment,” she said. “That says two things loud and clear: One of them is that the industry has confidence in the destination, which is a great thing. And No. 2, there is still potential growth in this business for Broward.”
Max Comess, a director in the hotel group at commercial real estate investment banking firm HFF, said Fort Lauderdale started its recent hotel growth cycle 12 to 18 months after Miami did.
“There’s still another year or two of really, really strong growth, we think, in Fort Lauderdale,” he said. “So the buyers and investors that come into Miami, they’re more or less buying stable assets. The market in Miami is sort of stabilizing, whereas in Fort Lauderdale, we’re still expanding.”
The market is also growing north, south and west of Fort Lauderdale beach, Comess said, as interest spreads up to Pompano Beach and Lauderdale-by-the-Sea, south to Hollywood and Hallandale Beach and west along the Interstate 595 corridor. Last year, HFF closed the sale of the Holiday Inn Express & Suites in Plantation and the DoubleTree Sunrise at Sawgrass Mills.
“Investors can’t afford or can’t get into the traditional epicenter,” he said.
Several limited service hotels have opened near the aiport and port in recent years, and a new brand — TRYP Maritime by Wyndham — is planned for Fort Lauderdale’s Marina Mile off State Road 84. There’s even been interest in new development near downtown Fort Lauderdale, with a dual-branded Aloft/Element project slated for North Federal Highway near Broward Boulevard.
All over the county, major properties have traded hands for sweet sums. The 998-room Diplomat, formerly a Westin resort, sold in August of 2014 to an affiliate of Thayer Lodging for more than $500 million with related parcels. The new owners made the Hollywood property part of Hilton’s Curio collection and plan to invest $100 million in upgrades.
Other sales include the Sheraton Fort Lauderdale Beach Hotel for $100 million, Westin Beach Resort & Spa in Fort Lauderdale for $149 million, former B Ocean Fort Lauderdale, now a Sonesta, for $65 million and Bahia Mar Fort Lauderdale.
But compared to Miami, deals are still available at a relative bargain, observers say.
“Miami’s getting too expensive for some people and there’s just not a lot of product. A lot of big hotels have traded,” said Suzanne Amaducci-Adams, head of the hospitality practice group at law firm Bilzin Sumberg. “People like to be on the sand, in close proximity to the water, those kind of things. So you’re seeing a spread to Fort Lauderdale where you can get more for your money as an investor.”
Amaducci-Adams worked on the acquisition of the Bahia Mar Resort & Marina last year.
Real estate-based projects such as a planned development around Galleria Mall in Fort Lauderdale are also contributing to interest, she said.
“That market has room to grow,” she said.
The last surge of hotel activity in Fort Lauderdale coincided with the start of the recession, which was disastrous for some of the properties. The planned Trump International Hotel and Tower condo-hotel project never opened, sending buyers to court to get their deposits back. After sitting mostly finished but vacant for years, the 292-unit project designed by the late architect Michael Graves is getting some final touches before opening this year as the Conrad Fort Lauderdale Beach, Hilton’s luxury brand.
“Basically we’re redeveloping the whole of the interior of the building and adding some meeting space, which the property didn’t have before,” said Conrad general manager Martin Wormull.
He said the time is right to bring a luxury product to the market, with airport upgrades, more passengers flying in and expansion plans in the works for the Greater Fort Lauderdale/Broward County Convention Center.
The addition of a Four Seasons next door, which was announced in February, confirms that the decision to plant a luxury flag in Fort Lauderdale was a good one, Wormull said.
“It’s great to have friendly competition,” he said. “I think it’s a lot harder if you’re a solitary operator to sell the destination. If there are multiple operators in the luxury space in a destination, that gives the consumer more confidence overall that the marketplace is right for them.”
Fort Partners CEO Nadim Ashi, whose company is developing the Four Seasons Hotel & Private Residences in Fort Lauderdale, said all the surrounding investment is “extremely positive.”
“It’s an uplift revival of everything around,” he said. “I think the sum of everything is much better than having just one project by itself.”
He expects the total investment in the Four Seasons, with a 150-room hotel and 95-100 residences, to reach $175-$200 million including land and construction.
With exclusive rights to develop the brand along the east coast of Florida, Ashi said he wanted to choose a market where the cost of land would allow him to deliver a high-end product for a lower price than the Four Seasons he is developing at the Surf Club in Surfside.
“When I looked at Fort Lauderdale, people were concerned that maybe it’s a little premature,” he said. “I felt very comfortable with the lifestyle, where Fort Lauderdale is in today’s cycle of development.”
Farther south, development is also moving forward at a rapid pace. The Related Group, well known for filling Miami’s skyline with condos, has a couple of projects in the works in Hollywood and Hallandale Beach. Both are condominium towers with a hotel component.
Beachwalk in Hallandale Beach, which has 84 condo and 216 resort units, is expected to start welcoming guests at the end of May, and Hyde Resort & Residences in Hollywood is set to come online on Dec. 31, 2016. Another project, Hyde Beach House, is also in the works in the same area.
“The premise was that when we saw what prices were going for in South Beach, when we saw what prices were going for in Sunny Isles, we saw we had a chance with buyers who couldn’t afford $2,000, $3,000 per square foot but were interested in owning a place that is on the beach or one block away from the beach,” said Carlos Rosso, president of the condominium division at The Related Group.
Beachwalk started selling around $420 a square foot, while Hyde sold between $700-$1,000 per square foot.
“The rates right now in South Florida are really high, so we think again that there’s a group of tourists and a group of buyers that are going to find out that it’s the same beach, it’s the same sand, it’s the same water and only 40 blocks further north and I’m paying half the price,” Rosso said. “It’s a great deal. The same will happen with hotel rates.”
Up the coast, condo-hotel project Meliá Costa Hollywood Beach Resort at 777 N. Ocean Dr. is expected to be completed in December with 304 units. The $180 million project will be managed by Spain’s Meliá Hotels & Resorts, the brand’s second location in the United States.
One of the biggest game-changers in Hollywood is the Margaritaville Hollywood Beach Resort, which started construction almost two years ago and is scheduled to open in late summer. The 349-room resort at Johnson Street and A1A will include eight restaurants and bars, three pools, a Flow Rider surfing machine, kids program, spa and 30,000 square feet of indoor-outdoor meeting space, general manager Cate Farmer said.
“Margaritavaille really is about defining your version of paradise,” she said. “So there’s something for everyone.”
For Margaritaville developer Lon Tabatchnick, paradise includes a quick route to an upgraded airport, improved beach infrastructure and easy access to the area thanks to three bridges connecting the beach to the mainland.
The prime beachfront locations also helps, he said.
“It’s a great piece of sand,” Tabatchnick said. “It’s pristine here. There are very few areas where you have that Broadwalk like that right on the beach.”
The Margaritaville project is expected to cost more than $150 million to develop. Starwood Capital stepped in as a partner two years ago.
Sara Luigs, 34, a tourist from St. Louis, strolled by the project’s construction site recently with her husband Mike during a post-Bahamas cruise stay. The couple was staying at the Diplomat and said they thought the Margaritaville looked like a good addition.
“It’s pretty,” said Luigs, who owns an interior design firm. “I think it’s going to be awesome.”
But Alexis Ramirez, a frequent visitor from North Carolina who was staying with friends, wasn’t a fan of the new resort.
“It changes the whole dynamic of the area,” the 27-year-old said.
Tabatchnick said he thinks the resort fits in with the character of the beach, which is populated with small independent motels.
“The reason for picking this brand is because it works with the small lodgings, it works with the easygoing lifestyle that is Hollywood Beach,” he said. “This escapism is what the Margaritaville lifestyle is about. It’s flip flops and shorts and it fits perfectly.”
Grossman, of the county’s tourism bureau, said the small independent properties that dot areas including Hollywood, Fort Lauderdale and Lauderdale-by-the-Sea remain crucial to Broward’s family-and-budget-friendly appeal.
“That mom-and-pop product is very important to our destination, not only from a historic perspective but because we’re marketing to people — and particularly international visitors — who are looking for that kind of low-rise, high-service, very personal travel experience,” Grossman said. “Even as we’re reveling in opening a Four Seasons and all of the high, high-end properties, we are at the same time delivering business to and encouraging the long life of the smaller properties.”
For Dan Kennedy, a commercial real estate agent who has owned more than 30 hotels and apartment buildings on Hollywood Beach over the years, the arrival of major resorts such as the Diplomat and upcoming Margaritaville has spelled opportunity.
After paying a total of $4.5 million for a motel and two apartment buildings smack between the Meliá and Margaritaville sites since 2013, Kennedy recently sold all three for $9 million to an investor who plans to upgrade the buildings and turn them into high-end apartments. He’s looking to make more investments now, but says even owners who decide to hold onto their motels as operators stand to gain because of increased interest in the area.
“Everybody’s embracing it,” he said. “We have never seen a busier season than we had last year. We don’t know why. And we have never seen more people interested in coming down here. The people at the small mom-and-pops are going to have banner years.”