Miami Beach Hotel Loan Hits Special Servicing For Third Time After Default
The owner of a hotel built in South Beach nearly nine decades ago failed to pay off its CMBS loan ahead of its maturity last month, and the loan has been transferred to special servicing for a third time.
The owner of the 99-room Hotel Breakwater South Beach, an entity tracing to Jordache Enterprises Inc.’s real estate arm, Nakash Holdings, defaulted on the $28M CMBS loan after it matured in September, according to Morningstar Credit.
New York-based Jordache is known for more than its denim, apparel and accessory branding — its real estate holdings include The Setai Miami Beach, Hotel Victor South Beach and The Villa Casa Casuarina, according to its website.
Jordache purchased the boutique hotel at 940 and 960 Ocean Drive, then known as the Breakwater Edison Hotel, in 2008 for $24.8M, GlobeSt. reported at the time.
Pillar Funding LLC originated the loan for the hotel in 2014 as part of a $1.2B CMBS mortgage trust package. Other lenders in the package are UBS Real Estate Securities Inc., Jefferies LoanCore LLC, German American Capital Corp., Cantor Commercial Real Estate Lending L.P. and General and Electric Capital Corp., according to a Securities and Exchange Commission filing.
940 Ocean Drive LLC, the borrower entity led by Nakash and Jordache’s David Gindi, Robert Spiegelman and Joseph and Ralph Nakash, landed the loan to refinance the hotel. The property was built in two phases in 1935 and 1939 as separate hotels and renovated to connect into one hotel in 2011.
The loan was first transferred to special servicer in October 2020 due to distress triggered by the pandemic, according to a June evaluation of the loan from KBRA.
The loan returned to the master servicer in May 2022 following a forbearance agreement, but just a few months later it fell back into special servicing due to nonmonetary default caused by a judgment lien related to the property’s restaurant tenant, according to KBRA.
That was around the same time a judge ruled that the Nakash family engaged in and attempted to conceal "an ongoing fraudulent scheme" to evict a restaurant tenant. The family was hit with $17M in punitive damages and $2.1M in attorney fees in November 2022, The Real Deal reported.
The borrower failed to pay off the loan by its maturity date in September 2024, but another forbearance agreement extended the loan maturity to last month and returned it to the master servicer. But then it defaulted last month and the loan went back into special servicing for the third time.
Morningstar Credit Analytics Senior Vice President and sector lead David Putro told Bisnow in an email that cash flow for the property never approached the underwritten level of $3.2M — the closest the property got to it was $2.3M in 2021. In the last full year on record, 2023, cash flow only reached $1.4M, he said.
A March 2024 appraisal valued the property at $40M, a 16.7% drop from $48M when the loan was issued, according to KBRA.
Jordache didn't respond to Bisnow’s request for comment.
