Canyon Ranch Miami Beach Set for Bankruptcy Auction

Canyon Ranch Miami Beach has some bad news circulating that may be quite harmful to the amazing brand. Some big news has hit the press this week regarding the filing of Chapter 11 bankruptcy protection by a Lehman Brothers Holdings Inc. subsidiary that owns the Canyon Ranch Hotel and Spa. Apparently, the filing of the status is meant to be a positive mechanism to help complete a sale of the amazing property with the best condo amenities in Miami.  A new potential buyer appears to be a conglomerate with a portfolio of hospitality properties that include the Enchantment Resort in Sedona.

So, what do we make of this negative news about the amazing Canyon Ranch Miami Beach?  How should it be interpreted?  Lets first look at the conditions leading to problems. Back during the Great Recession, a Lehman Brothers implosion was the talk of the financial community.  It secured ownership of Canyon Ranch Miami Beach through a deed in lieu of foreclosure.  The development group, WSG, experienced some significant difficulties in bringing the half a billion dollar+ development to the market unscathed during teeth of the Great Recession.  So consequently, the project fell into the wrong hands at the wrong time. Lehman Brothers had massive problems of its own and was ill-equipped to properly manage the new five star trophy property.

Canyon Ranch Miami Beach Troubled Assets

It’s important to place this new news into the proper context, the value of the Canyon Ranch Miami Beach condos isn’t $50mil, $100mil or $500mil – it’s a relatively modest $12.5mil, according to the latest reports. All three towers were successfully sold out to buyers with the exception of 13 condos still controlled by Lehman.  Those 13 condominium units would be included in the sale along with the hotel, a hotel lot and a retail lot.

Important Questions

The voluntary filings were made in U.S. Bankruptcy Court for the Southern District of New York.  A Lehman Brothers subsidiary, has also filed a motion to pursue the sale and announced in a written statement that it has a willing buyer.  The big question here is:  how will the current hotel operations be affected by these bankruptcy proceedings?  The good news to that question is that Canyon Ranch Living (the current hotel management entity) has stated that hotel operations will have no negative repercussions by the bankruptcy proceedings.  Whew, ok…that’s good news.  Do I believe them? Yes, I do. Currently, the hotel appears to be running quite efficiently from the lens of the consumer.  Any drastic changes now could certainly jeopardize a new deal from being executed – and no one would benefit from that.

Changes Imminent

So what does the future of Canyon Ranch Miami Beach look like?  Will the incredible programs and amenities be drastically changed to the detriment of hotel guests and condo residents.  No one knows for certain, by my estimation would be that the amenities are the amenities.  The magnificent spa, rock climbing wall, incredible fitness center and amazing pools are all hard assets; they should be operated indefinitely and enjoyed by condo owners for years into the future.  Could there be a name change of the project?  Yes…generally speaking, owners want to enhance the value of their own brands.  Could some of the extensive list of 40 daily classes be altered?  Yes, that is certainly a possibility as well.  These ‘soft’ resources could be changed rather quickly though.  The new group coming into power should be working on their new system now, during their due diligence process.

Cautious Optimism

All in all, this bankruptcy announcement is terrible news for the Canyon Ranch brand.   It will no doubt take a wrecking ball hit to the highly prestigious title of being the Number One Destination Resort in the World.   I spent a great deal of time personally within the Canyon Ranch Miami Beach world. Through living there and directing the sales of over $70mil in condos, I dislike hearing this news.  I really do love the buildings and the brand.  I believe that the community is really in a class-by-itself in terms of the overall health benefits of living there. Although the future of the community looks cloudy at the moment, I am optimistic that a new group can come in and make a positive impact. Stay tuned for more news on Canyon Ranch Miami Beach.  I’ll be watching the situation closely.

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