Not much has been said about the property or the project – in fact the former Renaissance has been closed and deserted since 2007 leading to speculation as to what will go there.

Last week, with Hyatt Hotels, Starwood Capital announced that they will be starting a joint venture to open an Andaz Resort & Residences on the property, it’s due to open in the fourth quarter of 2012.

The Former Renaissance Wailea

Starwood Capital already has a number of Hyatt Hotels in their portfolio, off the top of my head I know they own the Hyatt Regency New Orleans, and one in Chicago as well, so dealing with Global Hyatt isn’t exactly something new to them (I’m sure some will find that hard to believe!) In fact, this joint venture is a very good deal for Starwood Capital.

According to their press release, Hyatt will be contributing around $90 million for the renovation and improvements for the property, and the press release didn’t mention it, but Starwood’s biggest expense will most likely just be the land and it’s existing buildings. That’s a HUGE discount from the initial capital expense Starwood would have had to incur for the construction of the Baccarat hotel; not only would they have to tear down the existing buildings, but Baccarat required a completely different site plan and appearance than exists on the current site. Plus, even though Andaz isn’t a W or Baccarat or other Barry Sternlicht creation – the Andaz brand does have the design and architecture ethos that is typical for a Sternlicht creation.

I’ll be interested to see how the property ends up looking – all the Andaz’s so far have not disappointed in appearance and unique style, I’m sure this one won’t disappoint either.

andrew@alconic-inc.com

Now it looks as though Starwood is looking to sell each property individually – as that would provide a higher total sale price than a portfolio sale of 9 hotels would.

Unfortunately, Starwood’s sale of each individual hotel within the Societe Du Louvre portfolio goes against Starwoods original intentions of the hotels – keep them together and even expand the Crillon brand name with 6 star hotels throughout the world. In fact, in the press release when the deal was first announced the then-Chairwoman of Groupe Taittinger (which owned Societe Du Louvre) said:

It is of great importance to my family and myself that Barry and his team will bring a unique expertise and a full commitment to further developing the group our family has built over more than a half century,

Barry Sternlicht even chimed in by stating

We look forward to building on the company’s proud heritage by growing its economy hotel business in France and into new markets, particularly Eastern Europe, investing in the renovation and restoration of several of its existing jewel properties and working to extend their famous brands to new assets around the world.

It’s very possible that Starwood might only be selling the real estate and fully intend to keep the management contracts as well as ownership of the brands itself upon the close of the sales – but until that’s confirmed it’s anyone’s guess.

It’s a completely different economic environment now vs 2005 when the purchase of Groupe Taittinger was first announced and optimism was still abundant that the economic boom would continue unabated. That optimism called for Starwood to launch not only a Crillon hotel brand, but also a Baccarat (also purchased from Groupe Taittinger) and 1Hotels & Residences brand. As we know now – there is only one 1Hotel location actively being built (Washington DC) and two Baccarat Residences locations  – both overseas, and no expectation that a Crillon hotel brand may ever see the light of day.

The loss of income from those properties that have not been built/open yet is putting the pressure on Starwood to continue to pay their high returns to their investors – it’s commonly known that Starwood guarantees a 20% return on investment for the investors – making Starwood resort to selling the assets individually to ensure that those returns can be met, as well as ensure an ample supply of new investment money will be available.

I know we haven’t seen the end of Starwood Capital’s investment into the hotel/lodging industry – but the book may soon close on Starwood’s ownership of some of the most elite properties in the world – all in the name of saving face. Its an admirable move from an admirable company – instead of being so consumed with owning the best and having that title, they are showing their true colors by staying true to their reason for being – the clients who provide the money to invest.

andrew@alconic-inc.com

Yes, that’s correct, and that’s the same thing that Sillerman stated – although I didn’t make it sound as bad as he did.

I came across this story in the NYPost where Sillerman stated:

I think I have shown conclusively that I am not knowledgeable enough about the real estate business..

That’s not to say that he had bad ideas – one idea, which consisted of building a huge Elvis themed resort on land his company owned on the Las Vegas Strip – directly across from MGM’s CityCenter sounded like a slam dunk.. I mean what else would be better in Vegas than a high quality Elvis themed resort from the person who owns Graceland and the rights to Elvis Memorabilia?

His second project was a resort to be built in Anguilla; this is how I first learned of Sillerman and Flag Luxury as the project was initially going to be a St Regis Resort, then a Baccarat Resort. Now the project is all but dead – construction has not started, and the golf course which was to be the centerpiece of the resort destroyed because Sillerman decided to stop spending $200,000 a month to water the course. Not only that but he claims he has put over $200 million of his own money into the project – much more than the original $15 million he had agreed upon.

I give Sillerman alot of credit for having the guts to stand up and admit defeat, something that’s very hard to do especially in such high profile developments such as these.

There is no word on what Sillerman will do next, but it sounds as though his entire investment in the Anguilla property and the Las Vegas Strip property will be lost. The strip property was foreclosed upon a few months ago and the Anguilla property is going through the same property.

Most likely the strip property will be purchased very inexpensively by an investor and held onto for a number of years until the Las Vegas economy picks up – then the next biggest thing will be built. As for the Anguilla property, it sounds like that will go the same route.

andrew@alconic-inc.com

The article had a lot of conflicting information – perhaps due to the language translation, but it stated that the 1 Hotels projects will all be hotels, where as the Baccarat projects will primarily be residential – apparently the response to the Baccarat Residences, Shanghai has been great which gave Starwood the optimism they needed to expand that project.

Starwood is using $2 billion dollars it’s raised, evenly split between it’s non-hotel fund and it’s hotel fund to create these projects, each one is expected to cost between $10 and $200 million dollars, and they are expecting a 12-20 percent yearly return on investment – a pretty high number considering the state of the worldwide economy, but a very logical number for most developments. The timing just seems to be too soon for this to all work out.

The first project which will be under development is the Baccarat Residences Shanghai, which apparently Starwood “will sell” next week. It’s unclear if Starwood is selling the entire project to another developer while still being involved with the project via management and its use of the Baccarat name, or if its inferring that Starwood will start selling units to the public at that time. I tend to think next week will be when they start selling the units to the public since the Baccarat Residences, Shanghai website is still incomplete.

The article also goes on to mention how the first Baccarat project will open in Hawaii next year – but I’ve heard many rumors that the project hasn’t even broken ground and was indefinently delayed.. In fact the projects website has been down since at least the beginning of 2009 – redirecting to the main Baccarat Hotels website. It also states that the Baccarat Dubai project is on schedule for a 2011 opening – another fact that I find hard to agree with since almost all development has stopped or been considerably scaled back in Dubai due to the economic climate.

Over all, this article seemed to be too optimistic – since I’ve heard many stories that just don’t add up to what this story states. Additionally, I find it a little hard to believe that the only place that Starwood is focusing the development of its hotel brands is within China.

Something the article didn’t really touch on – except for a simple sentence stating Starwood would see to own or manage the projects, is the status of Starwood’s newly created SH Group. SH Group was created earlier this year with a very small initial investment of $100 million, with the purpose of opening and managing new 1 Hotel, Baccarat and Crillon locations (more on that here). It’s not very clear what the status of SH Group is, and $100 million is a very small investment – compared to the $2 billion that Starwood is apparently spending in China.

So whats going on here? Anyone have any insight?

andrew@alconic-inc.com

I just literally came across this while typing in BaccaratHotels.com and knowing me I won’t get to sleep until I write this post so here goes:

It looks like Starwood Capital is launching another project under it’s Baccarat brand – except this is strictly a residence project, located in Shanghai, China. It looks like this project may be officially announced in the coming days, if not today (Tuesday is infamous for product announcements).

The project formerly known as “Residence 8” or “Residence 8 – Shanghai” is now being relaunched as “Baccarat Residences, Shanghai”. There isn’t much information currently on it’s official site – http://www.baccaratresidences.com/shanghai but it sounds like Starwood is launching a new product category for its Baccarat brand – Baccarat Residences, which will focus on just residential condos rather than hotels.

I can’t really verify any information about the repositioning of the project to a Baccarat except for whats on a cached Google page of the project render’s website (the live site takes an obscene amount of time to load) which states that the East Tower is whats being announced, with the West Tower probably going to be built as part of phase 2.

From the Residences 8 website, the project will consist of two identical towers each of which will contain a total of 31 floors – 24 floors of 7 units per floor, 3 floors of penthouse units with 2 units per floor, and one “Grand Penthouse” which will take up the entire top floor of the building – it looks like the Grand Penthouse unit will be a total of over 8,600 square feet, the remaining floors will contain the lobby/lounge and recreational facilities.

I think we may be seeing more Baccarat Residences projects in the future – the baccaratresidences.com domain name gives that impression. It also seems as though the Baccarat brand may be expanded outside of North America faster than within North America. The Baccarat name is known better in the East than it is in the West, which may explain the canceling of the Baccarat Buckhead, and the announcement of the Baccarat Dubai and then the Baccarat Residences, Shanghai.

Baccarat Residences Shanghai Rendering (Click to Enlarge)

Baccarat Residences Shanghai Renderings - Bridge (Click to Enlarge)

andrew@alconic-inc.com

Last week, Starwood Capital andBarry Sternlichtannounced the formation of SH Group, a luxury hotel management company, and is looking to raise $100 million to start the company – quite an amount to start a management company if you ask me. But this isn’t going to be just any management company, this looks as though it really is Starwood Hotels II. In fact, the name HAS to stand for “Starwood Hotel Group” although I’ve never seen or heard anything to back that up, but c’mon…

In addition to managing the brands, the SH Group will also own some properties and some properties will be owned by third-party developers. I have a feeling that a lot of that $100 million they are raising will be going toward some equity investments for the construction of a number of properties to get the company off the ground. Once the company gets off the ground, developers will become more interested in the brands, and at that point income from fees generated by management contracts and franchise agreements will start to make up a lot of the revenue.

Ever since Barry resigned from his position at Starwood Hotels a few years back and then announced plans for 1 Hotels, then the purchase of the Louvre Group- I knew that his intentions were always to start another hotel company that may or may not ever be as large as Starwood Hotels – but will definitely have the cachet of being a very well known and sought after luxury hotel group. Not only that but he left Starwood at the top of its game – right prior to their launching Aloft and Element - I found it hard to believe that he was going to be painting in his studio in Nantucket as was reported at the time..

Since that time Sternlicht has launched 1 Hotels, Baccarat and Crillon hotels – although each of the three brands have been scaled back significantly due to the economy, and one – Crillon is being put on hiatus for awhile – probably due to the cost the brand would require when building or converting a hotel into a six-star brand.

With the launch of SH Group Sternlicht and Co are putting into motion a number of things, #1 SH Group will be a vehicle to franchise and manage their newly created hotel brands (1 Hotel, Baccarat and Crillon), #2 Further separating their hotel brands from the Starwood Capital umbrella. Starwood Hotels began its major growth period after it became a separate company from Starwood Capital, and I think having two (or more – depending on what happens with Crillon, Concorde Hotels and the Louvre Group) potentially large hotel brands have their own identity away from Starwood Capital helps int he market place.

Having the brands under the same umbrella as Starwood Capital is very confusing for both hotel investors, and developers and even Starwood Capital’s main investment customers who invest in Starwood’s other funds. Plus if you look at the other viable businesses which Starwood has – Starwood Land, Starwood Energy, and Starwood Infrastructure Finance, you’ll notice that they are somewhat separate from the main Starwood Capital umbrella. If it wasn’t for the publicly traded Starwood Hotels, the SH Group would probably be called Starwood Hotels.

The creation of SH Group is more proof that Starwood Capital is back in the game and very serious once again about hotels. Even though the economy is in the doldrums now and their brands aren’t really making any headway, there is a light at the end of the tunnel – and when the end of the tunnel is reached, Starwood will have some great hotels up its sleeve.

I haven’t been able to find any websites or any information on the SH Group except for the initial press release, Starwood seems to be keeping information very close to their vest, but since they have been pretty fast in setting up websites for their other companies – perhaps we’ll see something soon.

andrew@alconic-inc.com

He states:

Little does he know what a disaster it all is. And, it all happened long before the present downturn in the economy. It has to do with bad planning, the bane of all development in Anguilla today. Bad planning in every sense of the word. Bad management follows closely on the heels of bad planning in explaining what happened at Flag. 

We shall see if this project has any future at all. 

Meanwhile, the bush is rapidly growing back over the recently abandoned golf course.

So thats the take on the project from a local. Apparently Anguillahas a history of new developments falling victim to bad planning – is it the promise of making a quick buck on a beautiful island? Or is it the government who makes it difficult for legitimate outside companies to go about their business as originally planned. 

I still find it difficult to believe that both Flag Luxury and Starwood Capital would make such a mistake and be involved with a project that has such bad planning. Flag Luxury is a company that should know what its doing, and Starwood Capital wouldn’t get involved in a shady deal..

Since it seems as though Temanos Anguilla isn’t the only project having difficulties in Anguilla – its probably forces from within the island that’s causing the issues, which is sad since from pictures and the location – it has such great potential.

andrew@alconic-inc.com

Originally announced in January of 2008, it was supposed to be the hotel component of Flag Luxury Properties Temenos Anguilla resort property. Originally to be branded as a St Regis (when the project was announced in 2004) it apparently ended up being changed to a Baccarat Hotel & Residences location. The hotel was supposed to be finished by the end of the year – but from what I’ve heard from a few locals who have emailed me, it’s nowhere near being finished (can someone update me on that fact?).

Once the initial announcement was made a website immediately went live – www.baccaratanguilla.com, and I expected to see over time additional components added to it – pictures, descriptions, condo layouts – but instead the website went completely inactive over the summer. Additionally, the BaccaratHotels.com page redirected to the main Temanos Anguilla website rather than the BaccaratAnguilla.com site. Now, the BaccaratHotels.com site doesn’t even link to or mention anything about Baccarat Anguilla. The Temanos Anguilla website now has no mention of the Baccarat branded hotel, all references to it have been removed.

What happened?

Barry Sternlicht and Robert FX Sillerman – the principal behind Flag Luxury Properties have a history of working together on projects. Barry was still a part of Starwood Hotels when the St Regis was initially announced for the Anguilla project, and they are both principals in Riv Acquisition Holdings – the company that owns a portion of and is trying to take over the Riveria Casino in Las Vegas, so its not like Baccarat and Flag Luxury had a relationship like most other developers/hotel companies.

I was all set to just write this off to another casualty of the problems with getting credit – Starwood Capital isn’t exactly going gangbusters opening up their new brands like they were initially expected too – but then I came across a comment posted to my blog earlier today which inferred that the project has financial difficulties – with the management some how misleading the property owners about some aspect of the project. (Maybe that the centerpiece component a Baccarat Hotel will no longer be a part of the development?)

So it still could be a simple issue due to the credit crisis, or it could be a more underlying issue with the way business is being conducted at the property (which I hope is not the case – since Flag Luxury is a reputable company).

No matter what the real reason is – it sounds like Baccarat is permanently out of the equation for the Anguilla property, and the actual completion of the property will not occur as scheduled for late 2008. As for why I’ve been getting so many visits related to the Baccarat Anguilla post – its could be related to the lack of news on a project that property owners have already made deposits for.

We’ll see what the future holds for this property.

andrew@alconic-inc.com

Even during the height of the market, I couldn’t understand why this much luxury hotel development was occurring in Atlanta. I couldn’t see how a city could handle all of these high end luxury hotels – in addition to the mid-scale hotels that I never even researched – in an area that has always been populated, but was there suddenly a need for this many hotels?

Now, I never wanted this downturn to happen and I wouldn’t wish harm on anyone who has been affected by it – but the hotel industry in Atlanta is starting to get hurt pretty bad by the overbuilding of hotels, as well as a glut of high end hotels.

The first hotels that I noticed are no longer being publicized are the 1 Hotel in the Streets of Buckhead, and then about a month later, Baccarat Hotel within the same development seems to have fallen off the map. The Streets of Buckhead’s website used to have renderings and mentions of those two hotels throughout the site – now nary a mention of even a hotel being built on the property. Yesterday’s Wall Street Journal had an article about The Streets of Buckhead, which is being built by Ben Carter Properties and how it is bucking the trend (no pun intended) by continuing to build the project – Phase 1 being delivered by the end of 2009, beginning of 2010 with Phase 2 beginning to be built soon after.

Instead of the article mentioning anything about Starwood Capital’s involvement with the hotels or any mention of the 1 Hotel or Baccarat Hotel a simple sentence stating that hopefully a boutique hotel will be built in Phase 2 and a letter of intent is close to being finalized from a major hotel firm. Wow! What a difference from earlier this year and last year! The Streets of Buckhead went from having four hotels, to two hotels, and now no hotels in Phase 1. Now they are only talking about building one hotel in the entire development.

Tonight i came across another article relating to Atlanta’s hotel industry which spoke of the Mandarin Oriental being built in Atlanta – yes, that means construction is to start soon, even in this economy. The outlook of those developers is when construction is finished, the economy should be on its way back up, and even if it isn’t – they are looking into the long term.

The most worrysome forecasts of Atlanta came from the article

According to PKF Consulting, a hospitality research firm, the latest economic data indicates that Atlanta will face five straight quarters of job losses, which will peak in the second quarter of 2009. This coupled with shrinking personal incomes and tightening corporate travel budgets will be a severe blow for Atlanta’s hotels.

I know that Atlanta wont be the worst hit – NYC comes to mind as being more affected due to the amount of financial services jobs that are most likely going to be lost or have already been lost, but its still a pretty scary number for anyone who is not well financed for the worst.

Towns like Atlanta will survive – and hotels located in the town will survive too, but it may be awhile until things look as great as they did a few years ago, and as they say – only the strong survive.

andrew@alconic-inc.com

I just found out that Starwood Capital is in talks to sell some of their hotels under the Concorde Hotel brand. For those unfamiliar with Concorde Hotels, it is a group of 25 luxury hotels throughout the world, with 16 of them located in France. Most of the hotels do not include the “Concorde” name in their title, since they are historic and well-known hotels in their own right.

The purported buyer is a Saudi businessman who owns JJW Hotels and Resorts – and supposedly the purchase price for these hotels is 2 billion dollars. If that’s true, Starwood would have made almost all of their initial 1.27 billion in vestment (3.3 billion with today’s rates) in Groupe Taittinger by only selling small parts of the organization.

I’ll explain a little more in a minute – but first I want to mention that some hotels are not going to be sold, such as the Hotel de Crillon, and the Hotel de Louvre, nor are any of the hotels within the Louvre Hotel Group brands – Premiere Classe, Kyriad and Campanille, it’s also not very clear at this point if any of the Concorde Hotels outside of France are included.

If this deal does end up closing, and the price is anywhere near the 2 billion dollar range – Starwood Capital has once again proved itself by being adept of purchasing under utilized assets, turning them around, putting a branding push on them and just running with it.

When Starwood purchased Groupe Taittinger in 2005 it purchased a lot of assets in one transaction, the Concorde Group, Taittinger Champagne, Baccarat Crystal, Envergure Group which was Europe’s largest budget hotel company with 805 hotels at the time (now its second), and Annick Goutal perfumes. After the purchase was completed – Starwood quickly sold the Taittinger Champagne for almost 1 billion – by selling Concorde Hotels for 2 billion, Starwood has made back almost all of its initial investment in three years which is great.

In those three short years, Starwood has done a lot with Groupe Taittinger. It renamed the firm Groupe Du Louvre. It has reinvigorated its economy hotel brands, making new prototypes for Campanille, and giving the brands a decent internet presence which previously was almost non-existent. It also put the economy and Concorde hotel groups under the “Louvre Hotel Group” banner. It has taken Baccarat Crystal which was already a well-known worldwide brand and made a luxury hotel chain from it, and has proposed (although now it’s on the back burner due to the economy) to make the Hotel de Crillon the first of a 6-star chain of hotels throughout the world.

Lastly, the Annick Goutal perfume brand, almost unknown in America, is considered the most exclusive brand in perfume in the world. Starwood can potentially turn the brand into a line of high end spas within Baccarat or Crillon hotels, stock Annick Goutal amenities in the hotel rooms, but since it doesnt completely fit into the rest of the Groupe du Louvre umbrella, it can probably be sold for some ridiculous amount, further increasing the return on investment for Starwood Capital.

Starwood Capital’s ability to make a purchase and reinvent that purchase by almost turning it inside out, and then growing it into something amazing is always interesting to watch. Whenever Starwood announces a move, I always consider how that purchase will evolve beyond what is said and what is assumed.

andrew@alconic-inc.com