After being owned and operated for more than 25 years by local entrepreneur Phil McCabe, the Inn on Fifth is changing hands soon in downtown Naples.
Pebblebrook Hotel Trust, a publicly traded real estate investment trust based in Bethesda, Maryland, announced Thursday that it executed a contract to acquire the 119-room hotel for $156 million. McCabe purchased the property at 699 Fifth Ave. S. in August 1996 for $2.65 million and redeveloped commercial property across the street in 2010 to create the Club Level Suites at Inn on Fifth. The boutique hotel, which recently underwent a $5 million renovation, includes two fine-dining restaurants, Truluck’s and Ocean Prime.
Upon completing the acquisition of the Inn on Fifth, Pebblebrook will retain Noble House Hotels & Resorts to manage the AAA Four Diamond independent resort. The purchase, expected to be completed by the end of the second quarter, is subject to customary closing conditions, according to a news release from Pebblebrook.
“We are extremely excited to acquire this premier Naples landmark resort in the high barrier to entry Naples market,” said Jon E. Bortz, chairman, president and chief executive officer of Pebblebrook Hotel Trust. “The Inn on Fifth exemplifies South Florida’s effortless blend of upscale, laid-back luxury and was developed flawlessly and cared for meticulously by the current owner.”
McCabe has mixed emotions about the pending sale of a hotel that has been a major part of his life and a centerpiece for change on Fifth Avenue South for decades, so he’s not ready yet to talk in past tense about his Inn on Fifth. “It has a long story. It’s a long history,” McCabe said. “I’ve built everything around it. It turned Fifth Avenue around.”
Pebblebrook is the largest owner of urban and resort lifestyle hotels and resorts in the United States. The acquisition of Inn on Fifth will bring the number of properties in its portfolio to 54, including LaPlaya Beach & Golf Resort in North Naples and five other properties in South Florida.
“In addition, Noble House’s expertise and track record in managing and marketing luxury hotels, including our LaPlaya Beach Resort & Club, should create tremendous value and operating synergies for the Inn on Fifth,” Bortz said. “The resort will also become part of Curator Hotel & Resort Collection, which is expected to generate a wide array of expense reductions combined with enhanced technology and operating initiatives.”
Curator, founded by Pebblebrook Hotel Trust and a group of industry-leading hotel operators, features a distinct collection of hand-selected small brands and independent lifestyle hotels and resorts worldwide. The luxury and upscale portfolio for Seattle-based Noble House features 20 hotel properties.
Pebblebrook reports that it is evaluating numerous operating and physical enhancements for additional upside and increased cash flow at the Inn on Fifth, including a development opportunity on a 0.6-acre parcel that is part of the acquisition. The parcel is adjacent to the hotel’s main building, which fills the block between Fifth Avenue South and Fourth Avenue next to the Sugden Community Theatre.
In addition to its two restaurant tenants, the hotel property includes more than 21,000 square feet of ground-level retail space already leased and occupied. The upscale spaces include Vineyard Vines and Gulf Coast International Properties.
Based on the estimated February 2022 trailing-12-month performance, the Inn on Fifth generated total revenue per available room of $431, hotel earnings before interest, taxes, depreciation and amortization (EBITDA) of $11.3 million and hotel net operating income of $10.5 million after a 4% capital reserve, Pebblebrook reports. Preliminary March 2022 top-line results indicate further dramatic growth with March room revenues and total revenues surpassing March 2021 by more than 40% with a March 2022 average daily rate of more than $1,000.
Pebblebrook intends to fund the acquisition in Naples with about $78 million in cash and intends to issue to the seller about $77.6 million of perpetual preferred operating partnership units—3.104 million units at $25 per unit—with an annual distribution rate of 6% and about $0.4 million of common units, the company reports.
The Inn on Fifth becomes the third major Naples hotel to announce an acquisition in less than a month. In late March, London-based hospitality company Henderson Park paid $218.4 million for the Naples Grande Beach Resort, plus another $24.8 million for its 18-hole golf course and $4.8 million for its 15-court tennis center. About that same time, Denver-based Mission Hill Hospitality acquired the 99-room Inn of Naples, still undergoing a brand changeover to Tapestry Collection by Hilton. Terms of that deal have not been disclosed.
The sale of the three major hotels this spring doesn’t surprise Naples billionaire David Hoffmann, who said the city is an extremely attractive investment opportunity because people want to be here. “The dynamics of Naples and how it sits on the world stage of premier resorts was really undiscovered in a number of ways,” he said.
Hoffmann, who has acquired scores of commercial properties on Fifth Avenue South and in the Naples area, said he was aware of the sale of the Inn on Fifth but he didn’t pursue it. “We have our hands full right now with hotels,” he said. “We’re building three, possibly four, and we didn’t see where a fifth hotel fit in our portfolio right now.”