Landowner of former Miami Herald site on Biscayne Bay signals financial distress
The Malaysian firm that rocked Miami with the purchase of the former Miami Herald building is in financial distress, a development that could spark fresh questions about one of downtown’s prime building sites.
On Wednesday, Genting Hong Kong Limited, the cruise-operating unit of The Genting Group, which bought the Miami Herald site in 2011, told the Hong Kong stock exchange that it would temporarily suspend payments to its financial creditors, citing the impact of the COVID-19 epidemic. The suspensions encompass $3.4 billion in payments.
In a statement released Wednesday, Genting Hong Kong said it would undertake a debt restructuring, while using available to cash to fund daily operations. The unit previously issued separate warnings of potential losses on March 13 and August 7. On Friday, Genting Group Chairman and CEO Tan Sri Lim Kok Thay pledged nearly his entire stake in the Hong Kong cruise operator as collateral for loans, Bloomberg reported this week.
On Friday, shares in parent Genting Group fell more than 6% in Friday trading in Kuala Lampur, Malaysia. Bloomberg said investor confidence in the South Asian conglomerate has been “rattled” and cited a report from financial firm Nomura that expressed concern about the ongoing impact of COVID-19 and Genting’s history of transferring cash between subsidiaries, which include hospitality, gambling, palm oil and energy companies.
Moody’s previously downgraded Genting Group’s credit from Baa1 to Baa2 in May.
“The expected weakening in the credit profiles of the Genting group of companies, including the group’s exposure to Singapore and Malaysia, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the group remains vulnerable if the outbreak continues to spread,” the credit rating group wrote.
Genting’s cruise subsidiary operates the Star Cruises and Dream Cruises, which operate in Asia, and luxury line Crystal Cruises, which operates in the U.S. and has a Miami office. In February, Dream Cruises’ World Dream ship was quarantined in Hong Kong after positive coronavirus cases were found, Bloomberg noted.
Genting also operates the Resorts World Bimini resort, which is temporarily closed due to the COVID outbreak, and the casino at Gulfstream Park. The firm previously operated a ferry from Miami to Bimini; last year, Genting moved the service to Fort Lauderdale.
Failed projects
When Genting paid $236 million cash for the 14-acre former Herald property in 2011, the transaction clocked in at about $17 million per acre, one of the highest land sales in Miami-Dade County history. The region was reeling from the effects of 2008’s Great Recession, and many business boosters initially welcomed the purchase. The project has since stalled.
By current standards, the price is a relative bargain. In 2014, G&G Business Developments paid a record-setting $125 million for a 1.25 acre parcel — or $2,295 per square foot — located at the mouth of the Miami River to build its ultra-luxury Aston Martin Residences tower.
Genting, which also bought 16 acres adjacent to the Herald site (including the Omni Center) proposed to build a $3.8 billion waterfront resort and casino on the site, Resorts World Miami, that would have dwarfed every Las Vegas hotel with 5,200 rooms, four 58-story residential and hotel towers, 50 restaurants and an outdoor lagoon.
The sprawling site sits inside the boundaries of the Omni Community Redevelopment Agency and would have generated a windfall of tax revenue for the area. But after community complaints that the development was too big for the area and efforts to change Florida law banning resort casinos in 2013 failed, Genting unveiled a more modest plan for the property that would only occupy half of the former Herald site — a three-tower condo/hotel. That project also stalled.
Other proposals, including a 50-slip marina for large yachts in 2016 and a 300-room hotel on the site of the Omni bus terminal in 2017, have not moved past the planning stages.
Most recently, it has also proposed building a monorail that would link Miami Beach to the mainland.
Residual impacts
Genting’s presence did spur development in the nearby Edgewater area, where developers and speculators bought up properties and built rentals and condos in anticipation of the boost the neighborhood would get from the giant casino/hotel.
Other, costlier projects hoping to ride Genting’s coattails — such as The Related Group’s planned 298-unit luxury condo Auberge, which was announced in 2016 near the Arsht Center — were canceled. According to one industry expert, who spoke on condition of anonymity, Ugo Colombo had contemplated a condo tower at 1550 Biscayne Blvd., just a few blocks away from the Genting site. He later scrapped that plan and built a Ferrari car dealership instead.
In 2018, after persistent rumors that Genting had unsuccessfully tried to flip the Herald property, the company signed a multi-year contract with the Miami-based entertainment and live-events company Loud and Live to use the property as an event site. The location has housed the Art Miami/CONTEXT fair during Art Basel in December, along with other events such as Art Wynwood and the Miami Beach Jewelry & Watch Show.
Potential fire sale
Peter Zalewski, a principal at the real estate analysis firm Condo Vultures, said Genting would have to take a huge loss if they sold the Herald property.
“If they could have gotten out two years ago, they would have taken it,” he said. “Now they’re going to have to ride it through the next boom so they’re going to be stuck with it for the next three or four years. There’s now 30 months supply of condos in downtown Miami, and as the oversupply goes up, the value of land goes down.”
Zalewski points to the recent sale by Swire Properties, another giant firm based in Asia suffering from hospitality losses incurred by the pandemic, as an example of another company that recently divested some holdings. Swire sold two of its office buildings at Brickell City Centre for $163 million in July.
“Now Genting is getting a cash call because they’re so invested in tourism, so they might have to dump assets,” he said. “If they need the cash badly enough, they will have to do a fire sale.”
Correction: This story originally stated Genting has continued to lobby for a casino. It has not done so since 2012. It also misstated the per-acre price of Genting’s purchase of the old Miami Herald building.
This story was originally published August 21, 2020 at 3:02 PM.
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