CGI Merchant Group is facing a double whammy in Miami-Dade County, as its two Gabriel-branded hotels head toward foreclosure auctions.
The two planned Uniform Commercial Code, or UCC, sales come as South Florida’s real estate market feels the impact of high interest rates and skyrocketing insurance premiums.
Still, CGI Merchant, a Coconut Grove-based real estate company founded and led by Raoul Thomas, is not giving up its assets, saying in a statement that it is in talks with lenders.
Sources say the company is working on a recapitalization of the two hotels and has found debt partners who will pay off outstanding loans ahead of foreclosure sales. This would essentially eliminate the need for a public sale and cancel the auction.
The first asset up for public sale is the seven-story, 132-key Gabriel South Beach, located 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 linked to a $71.1 million loan the German bank made to a CGI Merchant subsidiary in 2021, shortly after CGI Merchant purchased the hotel.
The company’s 129-key Gabriel Downtown Miami, located in 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 downtown Miami tower, which also has 292 condo units.
The lender, an affiliate of Josh Zegen and Brian Shatz’s Madison Realty Capital, had scheduled the auction last Thursday, according to a public notice. The sale date has been extended by 30 days, according to sources.
“We are not moving 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, records show. The deal was made thanks to the $650 million CGI I Host Opportunities Fundwhich at the time counted among its investors retired baseball superstar Alex Rodriguez’s investment firm A-Rod Corp and his joint venture partner Adi Chugh of Surya Capital Partners.
It is unknown if A-Rod Corp. and Chugh still own a stake in the Gabriel Hotel. Neither responded to requests for comment.
CGI Merchant reopened the former Celino South Beach hotel under the Gabriel brand, part of the Curio Collection by Hilton, in 2021.
CGI Merchant purchased the hotel and commercial common areas of the Marquis condo tower, such as retail and restaurant spaces, in 2013. The price was $37.5 million, more than the $19 $.5 million shown in the records, likely due to the added cost of fixtures and furniture. .
At the time of the transaction, the Marquis Hotel was branded as Casa Moderna. CGI Merchant transferred the hotel under the Spanish brand ME by Meliá, then again under the Gabriel brand.
CGI Merchant first contracted for $24.5 million for the hotel in 2014, which was increased and repurposed several times over the next decade, records show. In 2021, Apollo Commercial Real Estate Finance reallocated a $60 million loan to a subsidiary of Madison Realty Capitalwhich refinanced and increased the debt to $60.4 million, records show.
CGI Merchant’s troubles extend beyond South Florida. In Washington, DC, 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 was preparing $100 million in new financing for the hotel, the The Wall Street Journal reported.
