UPDATED, June 13, 1:25 p.m.: Billionaire Michael Dell’s MSD Partners is planning to invest $75 million into the Boca Raton Resort & Spa, according to a Fitch Ratings report that reveals a financial breakdown of the operations of the oceanfront resort.
The 1,047-room resort, whose real estate sold for $462 million in May, sold for a combined $875 million, according to Fitch Ratings. That price breaks down to $589.7 million for the resort, including furniture, fixtures and equipment, and $285.3 million for the Premier Club. The social club offers its 11,000 members access to all the resort’s amenities and the Boca Country Club. It accounted for about 19 percent of the resort’s revenue in 2018, according to Fitch.
MSD Partners is under the umbrella of MSD Capital, a private investment firm created to manage the assets of the Dell Technologies founder and his family’s assets. The company also owns the Four Seasons Resorts Maui at Wailea, Four Seasons Resort Hualalai, and the Fairmont Miramar hotel in Santa Monica.
Dell’s firm financed the $875 million purchase with a $600 million loan from Goldman Sachs, and put nearly $280 million of buyer equity into the deal. The two-year, floating-rate loan will be sold to investors, according to the Fitch report.
Over the first four years of the loan term, MSD Partners plans to renovate the main resort and its Boca Beach Club through room renovations, redeveloping the public space, and amenity upgrades.
The property includes a full-service spa, three fitness centers, 18 tennis courts, 13 food and beverage outlets, an 18-hole golf course, seven swimming pools with one FlowRider wave simulator, a 32-slip marina and about 116,000 square feet of indoor meeting space.
The Blackstone Group sold the Addison Mizner-designed resort to Dell’s firm. Blackstone invested more than $300 million into renovating the property in the 15 years since it acquired it as part of a $1.25 billion deal that included four additional resorts.
The latest sale marks one of the largest hotel trades in South Florida in recent years. But the property has “historically underperformed its competitive set in terms of room revenue,” according to the report.
About 60 percent of the resort’s room demand in 2018 came from meeting and group business — above the 49 percent average for the overall hotel market. Meeting and group bookings are at lower rates than leisure bookings, which brings down the Boca Resort’s overall room revenue, according to the report.
Hilton’s management agreement to operate the hotel as a Waldorf Astoria began in 2013 and ends in December 2033, according to the Fitch Ratings report. Hilton gets a base management fee of 2 percent of total revenue, as well as a brand services fee equal to 4 percent of room revenue, and an incentive fee.
Fitch Ratings said the appraised value of the property was $906 million as of May with a projected value of more than $1 billion in two years.
The Commercial Observer first reported the $875 million purchase price.