Scoring in Record Time on Miami Beach Hotel Deal
In the weeks leading up to the 2020 Super Bowl in Miami, a Holland & Knight team of joint venture, real estate, environmental, land use and tax attorneys ran the deal-making version of a two-minute drill, helping a client acquire an iconic Miami Beach hotel for $120 million in record time.
Holland & Knight client King Street Real Estate GP LLC, the real estate arm of global investment fund King Street Capital Management LP, had been asked to join a group acquiring the Shelborne South Beach hotel, a 1940s-era, beachfront art deco landmark in the heart of South Beach. With the Super Bowl on the way, the new owners wanted the deal to close by Jan. 31, in time for the influx of guests expected for the Feb. 2 game. Holland & Knight quickly assembled a cross-practice team in multiple offices that worked seven days a week to bring the deal together. The Holland & Knight team included the national Joint Ventures and Hospitality practices, the Southeast Real Estate Practice Group, the Condominium Development and Conversion Team, land use lawyers in Miami, and attorneys with experience in environmental due diligence and hotel management agreements.
Closing the deal over a five-week period at the beginning of the year would have been a challenge under any circumstances, but the Shelborne sale was particularly complex. The deal already was in progress when King Street was asked to join the acquisition group. Toronto-based real estate developer Westdale Properties and London-based international hotel investor Cedar Capital Partners were in the midst of negotiations with the Shelborne owner, New York-based real estate investment trust W.P. Carey, when King Street was invited in as a partner.
The structure of the deal included two joint ventures (JVs) rather than the usual single JV, and the transaction was further complicated because the Shelborne is a condominium, requiring the buyer to acquire additional condo units in the hotel. There also were international tax issues stemming from the participation of Canadian and U.K.-based investment partners. With three acquiring companies involved, Holland & Knight had to work with at least six law firms representing the interests of the investment partners and the seller. Negotiations included the sale of 221 hotel rooms plus 30 individually owned condo units that were acquired with the intention of converting them to hotel rooms after the sale.
The condominium aspect of the transaction had to comply with the complex Florida Condominium Act. The nearly book-length law has been amended numerous times, and the courts frequently are called on to interpret new provisions. It is a minefield for any lawyer who isn't familiar with its intricacies. Fortunately, Holland & Knight has a Florida condominium team with decades of experience advising on this area of the law, including for numerous Miami and Miami Beach large-scale condominiums and conversions.
King Street formed the first JV with Westdale, and that JV and Cedar formed another JV for the acquisition and future renovation of the property. Although Westdale and Cedar had done some due diligence prior to King Street joining the deal, Holland & Knight had to perform separate due diligence for King Street to confirm that the property was suitable for its investment.
The transaction is a prime example of Holland & Knight's collaborative work model. The firm was able to satisfy the client's aggressive timeline because of its ability to draw on attorneys across practice areas. When clients hire Holland & Knight, they get the whole firm. For the Shelborne client, this collaboration enabled all the parties to get to closing quickly and meet their business goal of being ready for the Super Bowl.