Phoenix is officially out of the hotel business; City Council authorized the $300 million cash sale of the downtown Sheraton Grand Phoenix hotel to a national investment firm, TLG Phoenix, an affiliate of Thayer Lodging Group.
With the sale of the Sheraton, the city will still have between $40 million and $50 million of debt left over from the hotel, said Denise Olson, the city’s Chief Financial Officer. The sale is expected to close by June.
As part of the sale, the city will retain ownership of the land, leasing it out to TLG for $1 per year for 99 years, according to a City Council report. The sale stipulates that the land can only be used for the hotel and related purposes. Furthermore, TLG will receive the remaining $10 million from the hotel’s capital replacement fund.
Olson said $29 million has gone into the hotel, reallocated from the sports facilities fund. An additional $3.2 million dollars will be lost when the transaction is closed.
Since 2005, Phoenix has provided nearly $14 million for the hotel. Completing the sale in June, as opposed to several years down the line, would mean that those funds would not be returned back to the city, Olson said. The $14 million is not included in the aforementioned $29 million of debt.
“I’d like to stress that we were going to recover that money through the hotel operations because we have refinanced it to low debt service payments,” Olson said.
The city had anticipated selling the hotel for somewhere between $200 million and $225 million. Olson said selling the hotel now for $300 million dollars was a safer bet than to wait for the $14 million to be slowly returned to the city over the next several years.
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“I’m pleased as punch that we are getting this off the books,” said District 2 Councilman Jim Waring. “We should have never gotten into this in the first place.”
District 6 Councilman Sal DiCiccio said he agreed with Waring’s statements.
“Only in government could you consider a $40 million to $50 million loss a victory and run a victory lap,” DiCiccio said.
According to Waring, the sale makes the sports facilities fund available for use towards other projects.
One of those projects could be a new arena for the Phoenix Suns. In a separate vote on Wednesday, City Council passed a motion to hire the Barrett Sports Group for consulting services in an 8-1 vote. Waring was the only one to vote against hiring the service.
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The $190,000 price tag of the consulting service is in hopes of finding a suitable location for a new sports arena in the downtown Phoenix area. According to city documents there were seven other competitors for the contract, but the Barrett Sports Group was deemed the best for the job by city staff.
The term of the contract will extend until Feb. 2017. The $190,000 will come out of the Sports Facilities Fund.
Contact the reporter at Kmlane5@asu.edu.
