Billionaire Steve Ross’ firm secured approval for a sale-leaseback with Palm Beach County to develop a second convention center hotel.
The county is set to purchase the 1.8-acre Related Ross-owned parking lot and the future hotel to be built on it at 900 South Rosemary Avenue for $26 million. Related Ross will lease it back for up to 97 years. The developer agreed to pay $1.1 million a year in rent once the hotel is completed, or about $93,000 a month, which would increase by 3 percent a year.
The county can collect a 6 percent participation rent for annual revenues above $77 million as part of the agreement.
The hotel, planned for 18 stories and 400 keys, would be worth an estimated $349 million upon completion, according to the county’s estimate.
The lease breaks down to an initial 33-year lease, with options to renew for another 33 and then 31 years. The deal offers the developer opportunities to buy back the site at market value.
The developer will pay an annual parking lot rent for the future convention center hotel and the one it built 10 years ago. The county estimates the parking lot rent will total $397 million over the 97 years of the lease.
The sale-leaseback structure allows the developer to avoid paying property taxes on the hotel and land.
The deal includes a hotel-block agreement, in which a number of rooms are reserved for convention center use.
The developer received approval for the project earlier this summer and is expected to build the $290 million Curio by Hilton hotel with its own debt and equity.
Paying $26 million for a property eventually worth $349 million is a “no brainer,” County Mayor Sara Baxter said. County commissioners voted 6-1 in favor of the deal, the only holdout being Commissioner Gregg Weiss.
West Palm Beach Mayor Keith James told county commissioners Tuesday that the hotel was a “great deal” for the county, noting the city chose to forgo collecting property taxes on the site in favor of making a deal.
Ross himself sat in the front row of the county meeting and waved in support of the project.
But members of the Grandview Heights neighborhood, where the proposed hotel would rise, said construction will disrupt the neighborhood. The item was added to the county’s meeting agenda at the last minute, and neighbors said they were unaware ahead of time that the county commission would vote on the lease.
The West Palm Beach Neighborhoods Alliance formally objected to the agenda item because the county included it as an “add-on,” which is meant to be used for “unforeseen” emergencies relevant to the “health, safety or general welfare of the residents of Palm Beach County.”
The hotel is set to be completed by 2029.
Related Ross developed and owns the Hilton West Palm Beach convention center hotel, which it completed in 2016. It won the bid to develop a second convention center hotel two years ago.
Related Ross is among West Palm Beach’s biggest landlords and investors. The company developed and owns the city’s downtown retail center CityPlace, along with office and condo buildings on Flagler Drive.
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