Jeffrey Soffer’s Fontainebleau Miami Beach has exited special servicing on its $975 million commercial mortgage-backed security loan (CMBS). When issued in November 2019, the loan was the largest CMBS hotel loan in South Florida. The loan entered special servicing on March 30 amid the onset of the COVID-19 pandemic and following a modification request. The loan was returned to its master servicer on September 23 and payments reportedly remained current throughout the special servicing period, although as part of a forbearance agreement monthly reserve payments have been deferred to 2021; additionally, the hotel’s 2020 financials will not be used when calculating the property’s debt yield.
CMBS loans, which are secured by a mortgage on a commercial real estate property, are among the hardest to restructure as under the typical CMBS structure. A loan is transferred into a CMBS pool and a Master Servicer administers the loan. The Master Servicer is generally not permitted to enter into a loan modification or restructuring agreement and a Special Servicer is needed to potentially modify or restructure an individual loan in a CMBS pool. When loans are in special servicing the borrower cannot take out new debt or refinance their property.
South Florida’s hotels have bit hit with some of the hardest economic impact from COVID-19 where the industry must meet nearly $4.2 billion in CMBS payments. Miami Beach hotels, motels and short-term rentals were ordered shut on March 23 and have laid off thousands of employees. Fontainebleau Development also owns the JW Marriott Turnberry Miami, Turnberry Isle Marina, Turnberry Ocean Club and The Big Easy Casino in Hallandale Beach.
The Fontainebleau Miami Beach opened in 1954 and was designed by architect Morris Lapidus. The property spans more than 15 acres with 11 pools, a 40,000 SF spa, and 12 different restaurants and bars including Hakkasan and LIV Nightclub. The hotel is made up of four towers including the Chateau and Versailles towers with 846 hotel rooms as well as the Tresor and Sorrento towers with 748 condo-hotel units. It was acquired by Turnberry Associates for $325 million in 2005.