​Tropical Inn is an extraordinary boutique hotel centered on world-famous Duval St on almost 1/4 acre of land. Equidistant from the Mallory Sunset Pier and the Southernmost Point Buoy, this property is perfectly located. The 11 exquisitely appointed guest rooms are each unique and they are situated in 4 historic homes dating back as far as 1860 and in the heart of Key West’s Old Town…

When the year-end 2018 Smith Travel Research (STR) report for Key West and the Florida Keys was released, it lent credence to the fact that the downward market correction of the past two years, due to both a large number of new and renovated rooms coming online and Hurricane Irma, is turning around—although the effects of the national news incorrectly reporting major hurricane damage in Key West lingered. STR is the gold standard in hotel data benchmarking for more than 6.8 million hotel rooms worldwide and provides valuable information for the Key West lodging market. Let’s once again review the events of the past few years concerning our market and then take a look at the 2018 report and reports from mid-year 2019 and attempt to put it all in perspective.

​Located in the heart of Old Town Key West, the gorgeous, art-filled Key West Bed & Breakfast at 415 William Street recently sold for $3,000,000. The beautiful, circa 1898 Victorian three-story home is listed on the National Historic Register. It consists of 10 uniquely decorated guest rooms and large common areas for the guests to relax. It was purchased by the partnership group that owns the iconic Island City House Hotel next door. They own these and six other historic Old Town boutique hotels which are all managed by the Riley Hotel Group.

The real estate market for lodging in Key West continues to be sizzling hot through 2018 as a large number of lodging facilities have changed hands at record prices per unit. Most recently sold was the Coco Plum Inn located at 611-615 Whitehead Street. It is a prime Old Town location, one block from Duval Street, equidistant from Mallory Square and the Southernmost Point, and 2 blocks from the lighthouse and Hemingway’s house. The Coco Plum Inn consists of two classic historic two-story Conch houses with a swimming pool in between amongst tropical gardens and a 12-seat restaurant serving hot breakfast ordered a la carte from the menu. Coco Plum Inn has 14 transient-licensed hotel units and 1 non-transient apartment, plus a full commercial kitchen and restaurant seating area.

The big news of late summer 2018 in the Key West lodging market is the sale of the 222-unit Historic Key West Inns collection. KHP Capital Partners, a private equity firm led by former Kimpton Hotel executives and based in San Francisco, purchased the Old Town guesthouse portfolio as well as parking lots and office buildings that were included in the transaction. Closing on August 2, 2018, the $109 million price tag, well north of $450,000 per hotel unit, has prompted several to ask why the per unit value of this sale was so much more than the typical recent Old Town B&B transactions.

We often hear so-called experts, financial institutions, and property owners discussing the health of the Florida Keys and Key West lodging market. Certain segments within those overall markets are seldom if ever broken out of that discussion. Our brokerage work for lodging properties has primarily focused on historic Old Town Key West guesthouses and boutique hotels that have been grandfathered into our local zoning code and are a vital part of the unique tapestry that is “Old Town”. It is indeed that diverse and colorful tapestry that draws many, if not most visitors to Key West. The vast majority of these guests would never consider staying in New Town or Stock Island. Let’s take a look at demand in the overall lodging market compared to the Inns and small hotels in Old Town – we believe there is a significant difference in occupancy and revenue performance, particularly when overall demand weakens.

Finalized in December 2017 and effective January 1, 2018, the U.S. Small Business Administration (SBA) has updated its standard operating procedure (SOP) relating to equity requirements for its 7(a) loan program, lowering them from 25% to 10%.

The 7(a) loan program is the SBA’s most popular, allowing small business borrowers to obtain up to $5M in loans to fund startup costs, which include the purchase of new land (including construction costs), repairs to existing capital, and purchasing or expanding an existing business. In addition to lowering the equity requirements for the 7(a) program, the SOP update also streamlines and improves the administration of SBA 504 Loans, or the Certified Development Company program, which provides long-term, fixed-rate financing for the acquisition of fixed assets (frequently real estate, buildings, and machinery) necessary for small businesses to grow.

As buyers’ brokers for Florida Keys commercial real estate investors, we have found the SBA route a good fit for certain buyers and can match buyers with Preferred SBA Lenders.