Playboy to Buy Miami Beach Hotel for $12.5 Million

The bunny is checking in, and this time it plans to own the building. Playboy signed a contract on Nov. 2 to buy the Freehand Miami hotel for $12.5 million and redevelop it as a member-only private club, according to the company's Form 10-Q ^[1].

The property covers 2701, 2727 and 2731 Indian Creek Drive plus two nearby parcels, and the seller is an affiliate of London-based Generator, The Real Deal reported ^[3]. Bisnow called it Playboy's first members-only club since the late 1980s, after the last U.S. club in Lansing, Michigan, closed in 1988 ^[2].

How we got here

• Playboy put down a $1.25 million deposit when it signed, with the rest due at closing, per the filing ^[1].
• The Freehand Miami has 89 rooms and last sold in January 2012 for $12 million, according to The Real Deal ^[3].
• Playboy is moving its headquarters from Los Angeles into a Miami Beach office lease of about 20,169 square feet, the 10-Q says ^[1].
• At its peak the original U.S. club network had 22 locations, The Real Deal reported ^[3].

But Playboy is a small company making a real estate bet with limited cash. It reported $29.7 million in cash and equivalents in its latest quarter, per The Real Deal, so the roughly $5 million it plans to spend is a meaningful slice ^[3]. CEO Ben Kohn told analysts the club was "a better use of our cash" for now than a planned buyback, Bisnow reported ^[2]. The Real Deal points to a shorter-lived revival that Bisnow did not mention: a Midtown Manhattan club, open from September 2018 until November 2019 ^[3].

What it means for you

The price works out to roughly $140,000 per room, by our math, about 4% above the 2012 sale after 14 years. For a hotel investor, that is a thin gain on paper. The value case here rests on memberships, not room nights, which is why private club deals are priced on brand pull rather than cap rates.

Zoom out

Members clubs have become a selling point for ultra-luxury South Florida real estate, with Delano and Faena running clubs in Miami Beach, according to The Real Deal ^[3]. Bisnow named Infinity Collective as a partner on the club ^[2], but Infinity Collective told The Real Deal it is not currently involved ^[3].