Bob Sonnenblick speaks at the Caribbean Hotel Investment Conference
November 21 2014 Speakers at the Caribbean Hotel Investment Conference & Operations Summit lament a lack of financing that has created a dearth of deals, but they don’t expect it to last forever.
By Jeff Higley
Editorial Director
jeff@hotelnewsnow.com
PUNTA CANA, Dominican Republic—Buyers are laboriously prudent when it comes to hotel assets in the Caribbean, and speakers at last week’s Caribbean Hotel Investment Conference & Operations Summit agreed the process isn’t going to be any more fluid in the foreseeable future.
The biggest issue is easy to spot, panelists said. Despite strong performance fundamentals for the region’s hotel industry, lenders are reluctant—and in a number of cases unable—to throw their hats in the ring when it comes to deals.
“The performance numbers aren’t translating into the availability of capital,” said Gary Brough, managing director of KPMG, during the “Capital and the new normal” general session.
“Right now there is a ton of money going into the hotel business in the (U.S),” said Bob Sonnenblick, principal of Sonnenblick Development. “It’s going to take time to trickle down here.”
Adam Rosenberg (right) of Fortress Investment Group and Gary Brough (center) of KPMG react to a comment from Bob Sonnenblick of Sonnenblick Development during the -Capital and the New Normal- session at last week’s Caribbean Hotel Investment Conference – Operations Summit. (Photo: Jeff Higley) –
“The good and the bad of the region is oftentimes the absence of senior debt, or if there is senior debt you’re talking about 50% equity,” added Nick Hecker, senior principal at Och-Ziff Real Estate.
Bill Sipple, executive managing director of HVS Capital Corporation, said it’s difficult to source capital for the Caribbean, but cracks in the armor are starting to appear. He said one bright spot is U.S. commercial mortgage-backed securities lenders, which are starting to show an interest in the region.
“They’re seeking ways of finding new avenues that are less competitive and where they can get higher yields,” Sipple said.
Lorne Bassel, president and CEO of Crave Real Estate, said during the “Investor/capital provider outlook” general session that investors who have a clear intent to stay in the deal for the long run are more apt to obtain financing.
“(Lenders) want to see a compelling vision in the plan that makes your project different,” Bassel said. “Marina, golf and beach just isn’t enough. They want to see you bought in financially for the next 10 years.”
But Ali Elam, managing director of Fortress Investment Group, said there’s a simple reason large banks aren’t lending into the Caribbean: “They simply do not have the facility to make loans in the Caribbean. It’s not something they invested in infrastructure for.”
Another issue is rating agencies don’t have coverage in all 32 countries in the Caribbean, Elam said.
The obvious lack of capital creates a shallow deal environment in the region.
George Spence, principal of Leading Property Group, said while some deals have been completed during the past 18 months, it’s going to take at least that long for the flow to increase.
“The Caribbean is 18 to 24 months behind the U.S. in terms of capital and new deals going on,” he said.
Spence noted several key transactions in the Caribbean during 2013 and 2014, including the former Ritz-Carlton Rose Hall in Jamaica that sold to Playa Hotels & Resorts for $70 million and rebranded as the Hyatt Zilara Beach, and the 105-room One & Only Ocean Club in the Bahamas that was sold to Access Industries for a reported $1 million per room.
Interest is building
There is growing interest in acquiring hotels in the region from players such as Fortress Investment, according to managing director Adam Rosenberg. But a deal would have to meet certain criteria for the company to make an acquisition.
“There’s a paradox,” Rosenberg said. “The world seems awash in capital … yet it’s very hard to find a deal from a return perspective. It’s hard to find things that are the right fit. (The Caribbean is) off the radar for a lot of capital providers.”
Sipple said the appetite for projects in the Caribbean tend to be in the $30-million to $100-million range.
“It doesn’t have to be a mega deal to get interest,” Sipple said. “There’s a lot of non-resort type of properties that can be built here. There’s a need for them.”
“If you’re going to spend the time to put capital out, you might as well do a large project,” Sonnenblick said, acknowledging that select- and limited-service properties have a place at airports in the region.
Elam said Fortress’ acquisition of the debt on the Westin Grand Cayman Seven Mile Beach Resort and its refinancing of the Aruba Marriott Resort is proof the company thinks the recovery in the Caribbean will continue. The two deals combined equated to a $470-million investment he said.
“Investment in the Caribbean will always be a deep pocketed investment game, knowing that eventually you’ll have an investment that’s unique,” Elam said.
Help from governments go a long way
Panelists agreed that some of that investment should be offset by governments that want to attract development and capital infusion into their countries.
A prime example of that is the Dorado Beach, A Ritz-Carlton Reserve, in Puerto Rico, according to Kenny Blatt, principal and COO for CPG Real Estate, which owns the property.
“Government participation allowed us to slog through three or four tough years,” Blatt said during the “Hospitality Leaders Outlook” panel.
The $1,200 to $1,300 average daily rate for the property has given CPG reason to develop the other 1,400 acres of land around the project, according to Blatt. The company refinanced Dorado Beach on Wednesday with Och-Ziff providing the financing.
“It gives us liquidity to build real estate, including hopefully building a second hotel site,” Blatt said.
The effects an active government can have on resort development and transactions aren’t always visible, speakers said.
“When people talk about cash flows and returns on a project, the first question I have is always, ‘What is the tax impact?’” Hecker said.
There’s also a difference between strategic investment and economic investment in the Caribbean, panelists said.
“The most strategic investor is generally the government,” Sonnenblick said. “I’m surprised there isn’t more going on in the Caribbean where the government is doing more.”
John Keith, managing director for Caribe Hospitality, said policies of some of the Caribbean governments, especially the foreign exchange rates, make it difficult for the hotel industry to be successful.
“I would challenge the governments to review their policy,” he said, adding they must understand they are competing in a world full of alternatives.
Sonnenblick Development principal Bob Sonnenblick
November 14, 2014
Bob Sonnenblick panelist at Hotel Summit on November 11th, 2014 in Los Angeles
Hotel Summit on Tuesday November 11th 2014
Sonnenblick Development principal Bob Sonnenblick, a panelist, says LA just finished its best 12 months ever in total volume of hotel bookings and tourism, and supply is under control. In general, the coasts are very strong but the middle of the country is still fairly flat. He’s 100% concentrated on new development, but his biggest problem is that there is no land left in LA. (It’s why Katy Perry is always Walkin’ on Air.)
Our moderator, Arent Fox’s Rich Brand, asked panelists about hotel chains launching new brands and categories. Brian says the demographic he’s pursuing doesn’t value a big flag, and he notes independent hotels weathered the downturn along with their bigger cousins. Maki says loyalty points matter to Baby Boomers and Gen X, but a large portion of Millennials are brand-agnostic.
Bob says there are certain locations where you might be better off without a big brand if there’s an external room generator you can use instead (think beaches or convention centers). In addition, construction lenders now are more open to projects without a brand.
Rich says he’s seeing a lot of deals for limited and select-service hotels, and fewer full-service ones being built. Bob says the former have a higher profit margin because you don’t have a big spa, room service or gobs of meeting space. “It’s a rooms-only box.” Brian says the debt and equity markets love limited service because they view it as less risky. For his San Francisco project, he cobbled together EB-5 financing, historic and New Market tax credits, and a low-leverage senior construction loan.
Read full article at Bisnow
Los Angeles-based hotel developer Bob Sonnenblick, Chairman of Sonnenblick Development LLC has been chosen to speak at the upcoming CHICOS (Caribbean) Hotel conference at The Hard Rock Hotel in Punta Cana, Dominican Republic on November 14th, 2014. The panel topic will be “Hotel Capital in The Caribbean”.
11:15 A.M. TO 12:15 P.M. – GENERAL SESSION: CAPITAL AND THE NEW NORMAL: Panel of capital providers and advisers discuss investments in the Caribbean and what it takes to get a deal done. Who is financing projects in the Caribbean and on what basis? While it appears that confidence in the region
amongst financiers is improving this does not appear to be translating into readily available capital. Funding has been scarce for so long that it appears as if the landscape may have changed permanently. Does this environment represent the “new normal”? If so what does the new normal look like? How are
deals currently being structured? What are the key terms and conditions? Who are we dealing with and how sustainable are their interest in the region? The ability to raise capital is going to be absolutely critical if, as appears to be the case, the region is over the worst of the economic cr isis and we can start
to look forward to the future with cautious optimism. Help us resolve this crucial issue by participating in an interactive discussion with our panel of innovative and imaginative financiers bringing a fresh approach to a difficult and complex problem.
Moderator: Gary Brough, Managing Director- KPMG
Panelists:
Nicholas Hecker, Senior Principal – Och Ziff Real Estate
Bill Sipple, Executive Managing Director – HVS Capital Corp
Bob Sonnenblick, Principal-Sonnenblick Development LLC
Adam Rosenberg, Global Head of Gaming & Leisure- Fortress Investment Group-Credit Funds
Los Angeles Hotel
Oct 31, 2014
Talk to anybody in hospitality and they’ve got a hot project in the works. We did just that…
Sonnenblick Development principal Bob Sonnenblick
This morning, Sonnenblick Development principal Bob Sonnenblick (in full Halloween mode before trick-or-treating with his kids in Pacific Palisades) told us about his newest resort hotel project: Chambers Bay Resort in University Place, WA, a 30-minute drive from Sea-Tac Airport. What’s key for Bob, an avid golfer, is that next June, it’s going to be the home course of the 2015 US Open, where it will be seen by 300 million people on TV. Bob’s building a 320-room luxury hotel with a 40k SF conference center and a 10k SF spa, with a second golf course that will front directly on Puget Sound. The new course is being designed by the famed Robert Trent Jones Jr.
Bob says Chambers Bay is a $125M project. The hotel will be raised, so that people can look through the glass on the first floor and still enjoy the views (including the snow-capped peaks of the Olympic Mountains). He’s also working on a hotel site in the hot market of downtown Beverly Hills. Bob just got back from the best vacation of his life: two weeks in Phuket, Thailand.
Read on BISNOW
September 29, 2014
LA developer behind Chambers Bay resort says property is a ‘12′
The ground floor would be all glass so people walking onto the property can enjoy the views.
Robert Sonnenblick is the man who wants to build a $150 million resort at Chambers Bay, and he says as soon as he saw the location it was love at first sight.
“That site at Chambers Bay, on a scale of one to 10, is a 12,” said the Los Angeles-based developer. He plans to build a 258-room hotel, conference center and second golf course at the site in University Place where the U.S. Open will be played next June.
“To me, I’m shocked that no one built a hotel prior to me getting involved,” Sonnenblick said. “I fell in love with it the instant I walked onto the property.”
Sonnenblick is chairman of Sonnenblick Development, which was formed in 2011 to specialize in four-star oceanfront resort hotels across the country, with a focus on high-end golf resorts.
Sonnenblick heard about Chambers Bay about a year and half ago while working on a golf course and hotel development near Pinehurst Resort in North Carolina. Someone with the United States Golf Association told him Chambers Bay is hosting the 2015 U.S. Open and there weren’t any hotels near the golf course.
Sonnenblick was in Seattle for a business trip and decided to visit the golf course, which is owned by Pierce County. He said he stopped dead in his tracks when he set foot on the property, awed by the sweeping views of Puget Sound and the Olympics. He called it the best site for a hotel he has ever seen.
Part of Sonnenblick’s plan is to convert Pierce County’s award-winning Environmental Services Building into a 48,000-square-foot conference center and add a ballroom for weddings. The Environmental Services Building was designed by The Miller Hull Partnership.
“To have that already on the property is something that we’re thrilled with,” he said.
Pierce County is planning to build a new headquarters on the campus of the former Puget Sound Hospital and consolidate a third of its 3,000 employees. Officials say it’s too soon to say where employees now housed in the Environmental Services Building would go.
Construction of the county’s new headquarters could begin early next year. The county has picked a team headed by Wright Runstad Associates, with NBBJ Architects, Gunsul + Iverson Architects and Howard S. Wright. The headquarters could open by mid-2016.
More walking paths and biking trails would be built on the property to appeal to locals
Sonnenblick is big on views, and they are plentiful at Chambers Bay.
The new hotel will be raised about 22 feet in the air and the ground floor will be all glass so people walking onto the property can enjoy the views.
The hotel will have two restaurants and two bars. Sonnenblick said one of the bars will be like the “19th hole” found at most golf courses.
Adding a second golf course is an important part of the plan. Sonnenblick said the existing course is fescue grass and golf carts aren’t allowed, so it’s a walk-only course — and that doesn’t work with a hotel.
“The reason we need a second course is the normal tourist golfer does not walk,” he said.
Golfers will likely have better scores on the second course because it will have wider fairways and a more forgiving layout.
Sonnenblick also said he wants a “huge” increase in the number of walking paths and biking trails on the property to appeal to locals.
Sonnenblick said the plan is to offer discounts on rooms, food and beverages to people from University Place, Lakewood and Steilacoom.
His team just finished architectural renderings for the project and hopes to start construction next year.
“I want to start the day the U.S. Open finishes next June,” he said. “I don’t think the county or the city will be ready for us to start by then, so it will probably be a couple of months after that.”
Sonnenblick said the U.S. Open will generate tremendous publicity for his project before it even opens because Chambers Bay will be on the cover of golf magazines and featured on golf shows, just like Pinehurst was earlier this year.
Sonnenblick said he wants to build the hotel and golf course simultaneously and hopes to open both in mid-2017. He said the entire project will be privately funded.
The golf course design should be finished in about a month by architect Robert Trent Jones Jr., who also designed the original Chambers Bay Golf Course.
Other team members are: the Los Angeles office of Harley Ellis Devereaux, architect; Absher Construction of Puyallup, general contractor; KPFF of Tacoma, civil engineer; PCS Structural Solutions of Tacoma, structural engineer; and Transpo Group of Kirkland, traffic consultant.
(Editor’s note: This article was changed to reflect that PCS Structural Solutions is the structural engineer, and that the county hasn’t decided where to relocate its workers at the Environmental Services Building.)
Sonnenblick said he expects to hire a lot of local subcontractors.
This is Sonnenblick’s first project in Washington state, but not his first business venture here. He has financed several projects here over the years, including a $165 million construction loan and $35 million equity joint venture in the mid-1980s for Herman Sarkowsky’s AT&T Gateway Tower (now Seattle Municipal Tower).
Sonnenblick said several local companies have approached him about doing other projects since word got out about Chambers Bay. He said he is open to sites with views and waterfront access, but first wants to get the ball rolling on this one.
By Steve Maynard
Staff writer September 23, 2014
A Los Angeles developer unveiled drawings Tuesday for a resort at Chambers Bay in University Place that would be big and dramatic with a five-story hotel and sweeping views of Chambers Bay Golf Course and a proposed second course.
Click for Chambers Bay Resort Brochure
Chambers Bay Resort would consist of the 258-room hotel, a conference center, a 180-seat cafe and restaurant, and a swimming pool. The conference center would be located in what is now the county’s environmental services building, with a ballroom added on.
Pierce County Council members saw the architectural renderings for developer Bob Sonnenblick’s project for the first time Tuesday.
“That is the public’s property,” Ladenburg said. Those public amenities include the trails, parks and playground as well as the golf course where the 2015 U.S. Open will be played.
Her husband, John Ladenburg, was the county executive who spearheaded developing the former gravel mine into a championship golf course in 2007.
“To make sure that (citizens) still feel that that’s their property, I think, is very key with any development that we do out there,” said Connie Ladenburg, whose district includes University Place.
“We totally agree,” said county Executive Pat McCarthy. “Any place you put anything on this property is going to impact something. But the fact of the matter is we do have a philosophy that it does need to have good public access.”
County-owned Chambers Bay Golf Course will host the U.S. Open June 15-21 of next year. The resort hotel proposal is many months away from a final decision and would not interfere with the golf championship.
Deputy County Executive Kevin Phelps said it will take up to 18 months to update the master site plan, which would require approval by the County Council and the City Councils for both University Place and Lakewood.
The County Council likely would have to authorize the county executive to enter into an agreement with Sonnenblick.
Sonnenblick started a second 90-day extension granted by McCarthy for planning the project last week.
Phelps said Sonnenblick will have to propose financing that meets the county’s needs. The master site plan must be modified, and Sonnenblick must determine if he can fit in a second golf course.
Sonnenblick, chairman of Sonnenblick Development, said his $150 million project will enhance public access to Chambers Creek Regional Park.
“I am designing the hotel to increase public access,” Sonnenblick said in a phone interview Tuesday. “We are going to add a huge number of walking and biking trails.”
He said the project’s lower levels would be lifted up and lined with glass so that visitors could see the Puget Sound and the Olympic Mountains.
“We’re very excited about the project, and we designed it based on the input from a lot of local groups,” he said.
Sonnenblick hired Robert Trent Jones Jr.’s company to design the second golf course. Jones also designed the original Chambers Bay Golf Course.
Hole routings for the second course are expected to be completed in about three weeks, Sonnenblick said.
A second 18-hole course where golfers could ride carts is crucial for attracting older, higher-income customers to the resort, Sonnenblick said. Chambers Bay prohibits carts to prevent damage to fescue grass on the links-style course.
Sonnenblick met with University Place planners last month to ask questions of city planning staff as it related to his proposed development.
The City of University Place is waiting to see more detailed information about how the site will be developed, including plans for the second 18-hole golf course.
“We’ve only seen renderings of the hotel, we haven’t seen any maps or site plans,” UP City Manager Steve Sugg said Tuesday. “It’s our practice that we don’t react to renderings.”
But Sugg did say the city is interested in the project.
“The idea of a destination golf resort in UP is certainly appealing, but the details will have to be worked out,” he said.
Sonnenblick’s plan describes the hotel as reaching 66 feet, which is taller than the city’s current zoning allows. That is one of the issues that would have to be addressed through the site plan amendment process, Sugg said.
“We’ll let the process determine the outcome,” he said.
The only two council members to offer feedback were Connie Ladenburg, D-Tacoma, and Stan Flemming, R-Gig Harbor. Both voiced concerns about whether public access would be maintained.
Read more here: http://www.thenewstribune.com
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