CGI Merchant Group faces a double whammy in Miami-Dade County, with both of its Gabriel-branded hotels headed to foreclosure auctions.
The two planned Uniform Commercial Code, or UCC, sales come as the South Florida real estate market is feeling the sting from elevated interest rates and skyrocketing insurance premiums.
Yet, CGI Merchant, a Coconut Grove-based real estate firm founded and led by Raoul Thomas, isn’t giving up on its assets, saying in a statement that it’s in talks with lenders.
Sources say the firm is working on a recapitalization of both hotels and has lined up debt partners that will satisfy the outstanding loans prior to the foreclosure sales. This would essentially negate the need for a public sale and cancel the auctions.
The first asset headed to a public sale is the seven-story, 132-key Gabriel South Beach at 620, 626, 640 and 650 Ocean Drive. The auction is scheduled for July 17, according to a public notice filed this month by the lender, Deutsche Bank. The auction is tied to a $71.1 million loan the German bank provided to a CGI Merchant affiliate in 2021, shortly after CGI Merchant bought the hotel.
The firm’s 129-key Gabriel Downtown Miami at the Marquis luxury condo tower at 1100 Biscayne Boulevard is also expected to go to auction, tied to a $7.6 million loan. The hotel is on the first 14 floors of the 67-story tower in downtown Miami, which also has 292 condo units.
The lender, an affiliate of Josh Zegen and Brian Shatz’s Madison Realty Capital had scheduled the auction for last Thursday, according to a public notice. The sale date was extended by 30 days, according to sources.
“We are not walking away from either property,” CGI Merchant said in a statement. “We are actively engaged in productive discussions with lenders on both sides of these assets and are prepared to take all necessary steps to protect the rights of CGI and our partners.”
CGI Merchant paid $108.6 million in 2021 for the Gabriel South Beach hotel, according to records. The deal was completed through the $650 million CGI Hospitality Opportunity Fund I, which at the time counted retired baseball superstar Alex Rodriguez’s investment firm A-Rod Corp and joint venture partner Adi Chugh of Surya Capital Partners as investors.
It’s unclear whether A-Rod Corp. and Chugh still have an investment stake in the Gabriel hotel. Neither returned requests for comment.
CGI Merchant reopened the former Celino South Beach hotel under the Gabriel brand, which is part of Curio Collection by Hilton, in 2021.
CGI Merchant bought the Marquis condo tower’s hotel and commercial common areas, such as retail and restaurant space, in 2013. The price was a reported $37.5 million, more than the $19.5 million listed in records, likely due to the additional cost for fixtures and furniture.
At the time of the deal, the Marquis hotel was branded Casa Moderna. CGI Merchant switched the hotel to the Spanish ME by Meliá brand, and then again to the Gabriel brand.
CGI Merchant first took out a $24.5 million on the hotel in 2014, which was boosted and reassigned several times over the following decade, records show. In 2021, Apollo Commercial Real Estate Finance reassigned a $60 million loan to an affiliate of Madison Realty Capital, which refinanced and boosted the debt to $60.4 million, according to records.
CGI Merchant’s troubles extend beyond South Florida. In Washington, D.C., CGI Merchant defaulted in February on a $285 million loan on the Waldorf Astoria hotel, formerly The Trump International Hotel Washington, D.C. At the time, Thomas said he is lining up $100 million of new financing for the hotel, the Wall Street Journal reported.