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Homegrown hotel company seeking role as South Beach powerhouse

Among the childhood memories of cousins Keith Menin and Jared Galbut is a family chore: painting the walls of the old Gale Hotel on Collins Avenue, a 1941 lodging-turned-assisted living facility owned by their extended family.

These days, the walls of that building bear the photographs and mementos of their long-established Miami Beach clan. And Menin and Galbut are no longer applying the paint.

After forming Menin Hotels in 2009 and growing slowly over the past few years, the young cousins are overseeing a rapid, $100 million-plus expansion. Projects include the recent rebirth of the 87-room Gale South Beach & Regent Hotel, the very recent purchase of a bar in the South of Fifth neighborhood, the Asian restaurant they’re developing next to the bar, an expansion of the Gale that will debut next year, development of a 50-suite hotel on Ocean Drive and a planned move into Atlanta.

And those are just the projects they can talk about, for now, with certainty.

Still unknown is whether they’ll be successful in their bid to manage the hotel at Miami International Airport for the county — a process that is still in its early stages — or whether the developers they’ve teamed up with on a proposal for a project off Lincoln Road in Miami Beach will get the city’s nod.

Despite those question marks, one thing seems clear: With the backing of a powerful extended family and a track record of their own, the homegrown hoteliers are poised to become the area’s next big players.

“I am just so proud of them,” said Russell Galbut, their first cousin once removed, who considers himself more of a father figure. (They, in turn, refer to him as an uncle.) The family forebears, Abraham and Bessie Galbut, first arrived in Miami Beach in 1929 and later bought a corner store with a restaurant, eventually adding an auto tag agency, travel agency and other retail outlets. Russell Galbut, 60, is managing principal of Miami-based Crescent Heights, a national real estate development company that in the past has employed both Menin, 32, and Jared Galbut, 30.

“Both have Crescent Heights training, and Crescent Heights training is almost like boot camp,” Russell Galbut said. “If you can survive Crescent Heights, you can take any job on.”

Menin, principal of Menin Hotels, describes the relationship in sports, not military, terms.

“Imagine if you’re basketball players just starting out and Michael Jordan wants to hang out with you and coach you and teach you,” he said. “It’s hard to not be successful when you have a coach like that.”

Other keys to their success, the cousins say, are picking the right projects, focusing on their strengths, moving into new markets methodically and obsessing over data.

Rather than elbowing other hotel companies aside for high-profile acquisitions, they are turning old apartment buildings, empty shells or vacant lots into their next projects.

“We don’t fight against the big boys for the big properties,” Jared Galbut said.

And unlike investors who have had to depend solely on a tight credit market, Menin Hotels has several sources of capital. Galbut said the company is able to generate cash flow from its operations and has established good relationships with banks, “which wasn’t easy.” It also works with development partners and private investors — mainly Russell Galbut.

That source proved critical for the recent development of the Gale, at 1690 Collins Ave. The entire $35 million project — which included gutting, connecting and entirely rebuilding the interiors of two old structures — was finished in 11 months, opening in December for Art Basel Miami Beach crowds.

“We saw the project go from basically a derelict shell to an open hotel faster than I’ve ever seen a project be completed,” said Gregory Rumpel, managing director of brokerage firm Jones Lang LaSalle Hotels in Miami, which was not involved in the project. He called the breakneck pace “a testimony to their ability to navigate the local politics and regulatory environment.”

Builder Jerry McDonald, president of G.T. McDonald Enterprises in Plantation, said his crews were able to work nonstop because the company made decisions fast and had the cash to pay for the labor. McDonald’s company is also working on the Gale’s expansion, which includes an all-suite wing in a neighboring apartment building, as well as the Asian restaurant and a parking garage in the South of Fifth neighborhood.

“They have the resources to go ahead and set the development pace as they choose,” McDonald said. “It’s rare. Usually everybody has a song and a great idea....We’ve been building on the beach for years and we’ve seen guys come and go...rarely [do they] have the staying power of the Menin group.”

Menin and Galbut are the major shareholders and operating partners of Menin Hotels, which is privately held and does not release financial information. The family has interests in the company as well.

“Me, Russell and Keith talk about 25 times a day,” said Jared Galbut, the company’s managing principal. “My last call with Keith is usually about 1 a.m.”

Russell Galbut said he sees daily reports on how the hotel company is performing and offers his insights when asked.

“They do bounce ideas off of us and ask us for our thoughts on many issues. To the extent that we can help, we do,” he said. “But this is their show. They have to make it happen.”

The second cousins have found their built-in history and varying interests beneficial as they grow the company.

Said Galbut, the numbers guy: “We’ve been like brothers since we were 2. I don’t think we’ve ever had a fight.”

Menin, the deals and marketing guy, explained: “The reason I think Jared and I hardly ever clash is because we really like doing things that are the opposite of each other.”

Before starting the company, Menin — who worked at the family-owned Shelborne Hotel when he was a teenager — graduated from Cornell University’s School of Hotel Administration. After returning to Miami, he turned a family-owned assisted living facility into the 30-room boutique Sanctuary South Beach.

The next year, Menin added the 176-room Raffaello in Chicago, where Jared Galbut was living. Galbut, who studied accounting and finance at the University of Miami, was general manager for several years at that property, which the company still owns. He still travels to Chicago for monthly meetings and to oversee operations at Drumbar, a speakeasy-inspired venue that opened at the hotel last year.

In the meantime, Menin helped develop the Mondrian South Beach, which opened in late 2008 and is operated by Morgans Hotel Group. Driven by a craving for a good slice, he opened Pizza Bar on Collins Avenue in 2009.

By the time the duo formed Menin Hotels in 2009, the hotel industry had hit a recession-era brick wall. The portfolio grew bit by bit: the 51-room Bentley on Ocean Drive was added in 2010, followed by the massively renovated Shelborne in 2011. They still maintain ownership of Shelborne, but brought Wyndham Hotels & Resorts on as the management company earlier this year.

The company says that new marketing plans and improved management helped grow revenue and cut expenses at both properties between 2011 and 2012. Gross revenues increased at the Bentley by 25 percent that year and 16 percent at the Shelborne, Galbut said. Menin said the company is profitable.

As the company has added rooms across the beach, so have investors from all over the world. In 2011, hotel sales in Miami-Dade jumped 154 percent as transaction volume reached more than $550 million, according to Jones Lang LaSalle Hotels. Last year saw another increase, to $624 million.

All around the Shelborne, hotels have been re-imagined, renovated and re-opened — and the company is feeling the pricing pressure as it looks to future growth.

“There’s a couple hotels in that area that are just dying to be bought,” said Jared Galbut. “Everyone has raised their prices, so now it doesn’t make sense. We like to recreate properties with the history behind them and a little modern-day twist. It’s just tough now with the prices some people are asking.”

Gregory Rumpel, managing director of Jones Lang LaSalle Hotels in Miami, said values over the past three years have appreciated at a compound annual growth rate approaching 20 percent.

While other investors are finding deals farther north or west on the beach, or on the mainland, Galbut said he and Menin — both residents of Miami Beach — are keeping their focus selective and south.

“We stick to what we’re good at,” he said. “These 22 blocks are our home and what we know inside and out.”

The Gale property, which Morgans Hotel Group bought from the family several years ago to turn into an expansion of the chic Delano, became part of the portfolio after Morgans decided not to develop it and turned it back over. Occupancy ran at 99 percent in the months after the December opening, Galbut said.

“I was screaming and yelling after the first three months that we needed more rooms,” he said. The cousins looked across the street and realized their solution was in the Kaskades apartments, which will get a $15 million renovation to become the Gale Suites at Kaskades with 27 suites by next spring.

Galbut said the company lets each city and property dictate the target market. When Sanctuary opened, it was described as a safe, comfortable environment for women traveling alone, for example. And Raffaello in Chicago is geared toward business travelers.

But the company is still seen as youth-oriented.

Jeff Lehman, general manager of The Betsy, an upscale boutique on South Beach, said Menin Hotels appears to be catering still to “a younger demographic — a drinking, partying, loud-ish music demographic.”

Indeed, the company hosted visitors and parties for this year’s Winter Music Conference at Shelborne, and the underground Rec Room at the Gale is getting buzz for its parties.

“I think that as a lot of other properties are capitalizing on different markets, that they’re still working that market, which is very important for us on an ongoing basis,” said Lehman, chair of the Miami Beach Visitor and Convention Authority, a seven-member board on which Menin also serves. By capturing young crowds, Lehman said, Menin Hotels has the potential to encourage repeat visits as guests get older.

“They’re smart, they’re well funded and they certainly have a interest in keeping the beach going long term,” he said.

With plans to make some improvements at the Shelborne and major renovations in store for the Bentley this year, Menin Hotels is also working on several new projects — some pending selection by county or city entities — that would likely appeal to an even broader mix.

In partnership with developers Dan Staton and Marc Bell, the cousins hope to open a new 100-suite flagship hotel called Market Lincoln Lane as part of a larger project just off Lincoln Road. The city’s process to choose a team to develop that site is on hold while a convention center redevelopment project is selected.

“Hopefully it’ll get reignited soon,” said Staton, who said he struck a deal to work with Menin Hotels after being impressed with the group’s professionalism.

“I’m pretty picky,” Staton said.

He said there are key questions to consider when working closely with another group: “Do you have chemistry, do you have respect, do you think the same way, not cut corners? That’s really what it came down to.”

The Atlanta project, still in the conceptual stage, would also be a Market hotel, and the company plans to expand that brand into a chain of lifestyle hotels.

Bids have been submitted for the airport project, which would involve operating the hotel and associated restaurant and bar in Miami International Airport’s Concourse E. An airport spokesman said a selection committee meets next month for the first time, and a recommendation won’t go to the Miami-Dade County Commission until September at the earliest.

Jared Galbut said the hospitality group would try to capitalize on connections with beach properties at the airport hotel while improving rates and occupancy.

By 2015, the company expects to open Hotel Bancroft at 1501 Ocean Dr., a refurbishment of a onetime hotel and, more recently, mixed-use space with a nightclub that is expected to cost another $25 million. And next to the just-purchased Radio Bar at 814 First St., so named for the giant radio tower in the back, they are building a parking garage and an Asian restaurant called Red Ginger for an investment of about $30 million. In a twist on the trend of taking land-based restaurants to sea, Red Ginger was inspired by a restaurant on two ships in the Oceania Cruises fleet.

Over time, the company plans to grow existing concepts including Pizza Bar, Red Ginger and Drumbar. Radio Bar, a former pop-up, boasts Pizza Bar food and a cocktail menu crafted by Drumbar’s mixologist.

Oceania Cruises founder Frank Del Rio knows the extended family well and said they are using the Red Ginger name “with my enthusiastic blessing.” Russell Galbut was an early investor in the cruise company and remains a major shareholder and a member of the board of parent company Prestige Cruise Holdings.

Del Rio said the cousin’s foray into hospitality doesn’t surprise him at all.

“Apples don’t fall far from trees, as they say,” he said. “If you’re living in Miami Beach, the hotel industry is staring at your face every day. If you’ve got the DNA in your blood and you’ve got the available capital and you went to Cornell Hotel School, the next step is I’m going to start a hotel company, and that’s what Keith did.”

Del Rio said he thinks the company has staying power. “If you’ve been to their restaurants, been to their hotels, it’s a young hip vibe, but one that’s not so trendy that it’s here today, gone tomorrow,” Del Rio said. “It’s got roots.”