|By Jennifer Bjorhus, Star Tribune,
MinneapolisMcClatchy-Tribune Regional News
August 03, 2010 --An East Coast hotel investor in line to buy the troubled Grand Hotel Minneapolis for $36 million may be backing out of the deal.
Pebblebrook Hotel Trust agreed in May to purchase the downtown Minneapolis luxury hotel, whose guests have included celebrities such as Janet Jackson and Bon Jovi. However, according to a recent government filing, the deal might not close.
Pebblebrook said in the filing that "based on our due diligence activities to date, there is significant uncertainty as to whether this acquisition will be consummated."
The comments are contained in a July 22 prospectus Pebblebrook filed with the Securities and Exchange Commission to offer 17 million shares of stock. Pebblebrook said that it had extended its due diligence on the Minneapolis hotel an additional 30 days to July 30.
The extra time would allow it to review "significant and unanticipated matters that we became aware of during our due diligence process," it said.
Pebblebrook, a real estate investment trust (REIT) in Bethesda, Md., did not return a phone call Monday.
According to the prospectus, the Grand Hotel Minneapolis had revenue of $2 million for the quarter ended March 31, with an occupancy rate of 54 percent.
The hotel, at 615 2nd Av. S., was once the home of the Minneapolis Athletic Club. Local developer Jeffrey Wirth, head of Minneapolis-based Wirth Cos. Inc., opened the hotel in 2000 after a significant renovation.
He put the hotel on the market in December. Wirth's lender, iStar Financial Inc., a REIT in New York, confirmed Monday that it took title to the property via a deed in lieu of foreclosure. It said it couldn't discuss the matter.
Wirth's two waterparks in the Twin Cities have recently sold. The Ramada Minneapolis Northwest & Grand Rios Indoor Water Park in Brooklyn Park recently sold to a local hospitality company. In April, Wheelock Street Capital, a real estate private equity firm in Greenwich, Conn., bought Wirth's Radisson Hotel and Water Park of America in Bloomington for an undisclosed sum.
Wirth's Central Medical Building in St. Paul is also on the market.
Wirth said in an interview Monday that he is under various confidentiality agreements and can't address any of the sales. But he said his company is not in liquidation mode and "will not be selling any more properties in the foreseeable future."
Wirth said that he would continue to maintain a "significant financial position" in Grand Rios and that Wirth Cos. was moving forward with other projects in the Upper Midwest.
A local hotel broker said that Pebblebrook's disclosures about the Grand Hotel Minneapolis were somewhat unusual, but that there could be technical reasons for it.
"It could be just that they're hypervigilant and very, very cautious," said Ted Leines, principal of Leines Hotel Advisors in Eden Prairie. "It's a little bit unusual."
Jennifer Bjorhus --612-673-4683
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