In South Florida’s robust multi-family market, apartment listings have reached high prices. But for a newly constructed rental property in downtown West Palm Beach, it turned out that hospitality was its calling.
The building traded for $83.9 million, after the 217 micro-unit property was revamped as a hotel.
Electra America Hospitality Group and Korman Communities, through an affiliate, purchased the eight-story building at 695 South Olive Avenue from Transwestern Development Company, according to a deed.
The building was completed last year on 1 acre. The deal comes down to $386,751 per key.
Originally called the Current Apartments, the property is now an AKA hotel.
Gio Fausone of Gulfstream Real Estate Advisors represented the seller and buyers.
Turning apartments into hotels may seem counterintuitive, as South Florida’s multifamily market has thrived on strong demand, allowing rents to soar and stimulating appetite for investment. But when it was marketed as apartments, offers came in at $60 million, which is lower than the seller had expected, according to Fausone.
At the same time, the hospitality market has in some areas exceeded pre-pandemic levels, and property has small units, averaging around 400 square feet, he said.
“So I thought about it and thought it was big hotel rooms, so the buyers ended up being hotel users,” Fausone said. “And they love it.”
Palm Beach County hotel occupancy reached 77.5%, with an average daily rate of $324 per key during the week of April 2, compared to 75.4% and $218 during the week of April 2. same period of 2019, according to STR, a global hotel data and analytics company. .
Houston-based Transwestern, led by Chairman Robert Duncan and CEO Larry Heard, developed the building with the help of a $30 million construction loan secured in 2020 from OZK Bank, shortly after Transwestern paid $7.3 million for the site. Fausone also negotiated the purchase of the land.
Electra America Hospitality, led by director and managing partner Russ Urban, is a joint venture between Lake Park, Fla.-based Electra America and hospitality company AKA, according to its website. Electra America and AKA have combined assets of $6.9 billion under management.
Plymouth Meeting, Pa.-based Korman Communities, run by Larry and Brad Korman, started in the serviced apartment industry and branched out into hotels, creating the AKA extended-stay hotel brand, according to the website. by Korman. Korman’s portfolio spans Florida, the Mid-Atlantic region, Beverly Hills and London and is valued at over $2.2 billion.
Miami Brickell also has an AKA hotel at 1395 Brickell Avenue. The West Palm Hotel will be open to guests in September, according to the AKA website.
Downtown West Palm has attracted investors for existing real estate and developers planning new projects.
A joint venture between Brand Atlantic, a newly formed company led by Andrew Dance and Adam Demark, and Wheelock Street Capital plans to build a new 12-story office building at 300 Banyan Boulevard and renovate an adjacent historic office building at 111 Olive Street .
Additionally, Joe Furst’s Place Projects and Ned Grace’s NDT Development have embarked on the 40-acre Nora District project, which will include the adaptive reuse of a row of warehouses in retail and food service, as well as construction multi-family and office towers, and mid-rise buildings.