The Raleigh hotel, an Art Deco gem famous for its curlicue framed pool, sold this week for $55 million to new owners who plan to turn the hotel into a national brand.
But before Raleigh siblings pop up in places such as Brooklyn, Chicago and Hollywood, Calif., new owners David Edelstein and Sam Nazarian will pour millions into the historic 105-room property at 1775 Collins Ave. on Miami Beach.
They certainly have experience in that area. Edelstein, principal of New York Citys Tristar Capital, developed and owns W South Beach, about four blocks north of the Raleigh. And Nazarian, the Los Angeles-based founder, chairman and CEO of hospitality and entertainment company sbe, opened the SLS Hotel South Beach just down the street from the Raleigh earlier this year.
The goal for the Raleigh isnt to create the SLS or W, very highly stylized properties, but to create a very charming, very chic hotel that will be an alternative to the two properties, said Arash Azarbarzin, president of sbe Hotel Group, which took over operations at the hotel Thursday. To bring the Raleigh back to its grandeur.
Initially, the new owners plan to invest about $2 million to $5 million in new furnishings and technological updates, but keep the spirit and the flavor of the hotel exactly as it is, because it is magic, Edelstein said. The hotels staff will remain.
The hotel, which was built in 1940,will stay open during short-term renovations expected to take place between April and November. The owners will spend a few months coming up with plans for a more comprehensive renovation with a bigger budget.
Nazarian wasnt available to speak to The Miami Herald Friday, but he told The Wall Street Journal that longer-term plans call for another $15 million to $35 million in renovations to the hotel that, depending on approval from the citys historic preservation board, could add 70 rooms and more restaurant and bar areas.
The Raleighs existing relationship with Miami chef Michael Schwartz will continue, and the renovation is expected to include a new restaurant from him next year. Edelstein said he envisions a Miami Beach version of Michaels Genuine Food & Drink, the Design District favorite. Azarbarzin said that while no details have been finalized, Schwartz will have more of a presence now that the sale has gone through.
Brilla Group, the private equity firm in Miami that sold the hotel this week, bought the hotel from celebrity hotelier Andre Balazs for $30 million in 2009, when the tourism industry was suffering the worst impact of the recession.
As the economy recovered, the hotel market rebounded quickly, bringing a flood of new competitors, said David Brillembourg, Brilla Groups chairman and CEO.
For us, it was the right time to prepare for an exit, he said, adding later that the firm is very satisfied with the selling price.
Edelstein said he has been staying at the Raleigh since the 1990s and has long had a passion for the boutique property.
Owning it has always been a dream, he said. He approached Brilla Group earlier this year and said he was interested in buying it. By May, he said the deal was done with a handshake. In the course of talking to potential operators everyone from Italian families to major chains he spoke to Nazarian, who was interested in not only operating but also co-owning the hotel. The two have been friends since meeting at a Miami Beach design review meeting in 2005.
The long-rumored sale officially closed Thursday. The $55 million price tag includes the hotel, a nearby parking lot and the Raleigh brand.
Its definitely on the high side, but it definitely shows the strength of the Miami Beach market, said Suzanne Amaducci-Adams, head of the hospitality group at the Bilzin Sumberg law firm. She represented another group that was interested in purchasing the property earlier this year.
She said the property is attractive because of its beachfront location and relative flexibility.
The Raleigh brand is an established name, but its not an established brand, so theres a lot you can do to shape the brand, she said.
While the new owners say their priority for now is refurbishing the property, they see potential in future expansion. No time frame or specific locations were named, but locales including Brooklyn, Chicago, Boston, Hollywood and San Francisco were all thrown out as examples in interviews. Azarbarzin said the most likely scenario would involve renovation and repositioning existing properties.
To duplicate the Raleigh anywhere else...would be impossible, he said. What we can transport and potentially take to other properties is the essence of the hotel and the culture and the service.