Feb. 21–SARASOTA — When a national investor in luxury hotels drops $171 million on a local property, people pay attention.

The proposed sale of the Ritz-Carlton Sarasota sends a signal to other real estate investors about the potential of the Southwest Florida market, experts say.

"It confirms to me that Sarasota is on the radar screen for significantly large investments in real estate," said Ian Black, a veteran commercial broker here. "It's a feeling of confidence in the market. Things like this go global, and it brings us a step up the rung, in a different light, from investment standpoints."

The Ritz is a unique property for the region, with that $171 million price tag including the 266-room bayfront hotel, a private club on Lido Key with 410 feet of beachfront, and an 18-hole golf course.

Opened in late 2001, the 17-story Ritz is credited with sparking a renewed wave of development in the downtown Sarasota area as well as bringing well-heeled visitors to a region where tourism is critical to the economy.

Buyer Ashford Hospitality Prime said it seeks out luxury hotels and resorts that offer the highest levels of revenue per available room.

"The Ritz-Carlton Sarasota is an institutional quality asset in a high growth market that we were able to secure at an attractive price," Richard J. Stockton, president/CEO at Ashford Prime, said in an interview with the Commercial Property Executive website. "The market to acquire luxury hotel assets of this caliber is fairly thin, and in many cases the target pricing would not meet our financial return objectives. In this case, we were able to acquire the asset at an attractive basis based on historical operating performance, but can also look forward to future growth."

Virginia Haley, president of Visit Sarasota County, said people she has talked with since the sale was announced Friday are impressed with Ashford Prime's stable of properties.

A solid buyer

"They are clearly performing on the upper level of the luxury brand," Haley said. "That they own other Ritz properties is very encouraging.

"We've seen other hotels that are purchased by large real estate investment companies that have all kinds of things in their portfolios," she said. "When you have a company that specializes in this particular product, they know how to achieve a bottom line in terms of superior customer service, care of clientele, strong repeat business — all those things that make it a great hotel experience."

Dallas-based Ashford Prime says it plans to pay for the Sarasota property with cash and by drawing on its revolving credit line or securing a mortgage.

The hotel posted $10.2 million in net operating income in 2017, the company said. It averaged 78.1 percent occupancy, with an average daily rate of $364.04, which resulted in the hospitality measure of revenue per available room of $284.38.

"The city of Sarasota was recently ranked by Forbes as the sixth-fastest-growing city in the U.S.," Stockton said. "And while we are not the only hoteliers to notice this, and there is some near-term supply on the horizon, our returns are bolstered through a gross operating profit hold-back guarantee provided by the sellers. So, we feel comfortable that this investment will generate attractive returns for our shareholders."

The Ritz is being sold by its original developer, SLAB LLC, a Wichita, Kansas, company headed by Robert Buford. As part of the deal, SLAB will provide a $5.5 million income guaranty to cover any decrease from 2017 hotel gross operating profits for up to three years.

Ritz flag will fly

The hotel will continue to fly the Ritz-Carlton flag.

"There is a long-term management contract in place with Ritz-Carlton," Stockton said in an email to the Herald-Tribune. "We believe that this property is well suited to be a Ritz-Carlton, which was one of the reasons we were interested in acquiring it."

The hotel and other amenities are in "first-class condition," he said, after $21 million in recent improvements, including a major renovation in 2015.

"Furthermore, we believe it has all of the amenities necessary to deliver a fantastic guest experience to a wide variety of guests," Stockton said. "As a result, we do not anticipate investing beyond the normal maintenance program at this time."

Hotel management did not respond to a request for comment.

Other Florida properties

Ashford Prime is no stranger to Florida. The publicly traded real estate investment trust, with $1.5 billion in assets, owns the 293-unit Renaissance Tampa International Plaza Hotel and the 142-unit Pier House Resort & Spa in Key West.

In November, it put the Renaissance Tampa up for sale as part of its new strategy to focus on luxury hotels and resorts and shed "non-core" hotels.

The Key West property was damaged by Hurricane Irma but was soon open for business.

The company posted a third-quarter net loss of $2.7 million, or 9 cents per diluted share, due in part to the impact of Irma on the Pier House and its Ritz-Carlton St. Thomas hotel on St. Thomas in the U.S. Virgin Islands, which also sustained storm damage. Two of the company's 12 hotels also were damaged by wildfires in northern California last year.

Plans near Lakewood Ranch

As part of the Sarasota deal, Ashford Prime is paying $9.7 million for 22 acres of vacant land next to the Ritz-Carlton Golf Club near Lakewood Ranch. Plans were filed in December by the current owner to build 102 multifamily units and an amenity center there. Those plans called for 34 buildings, each containing three units, at the club.

"We will be reviewing our plans for the site in greater detail post acquisition," Stockton told the Herald-Tribune.

Developed for a reported $100 million on the site of the former John Ringling Towers, the Ritz-Carlton got off to a rocky start, opening several months after the 9/11 terrorist attacks that battered the travel industry.

"It opened at a very rough time," Haley said. "So it took a little bit to take off."

SLAB also wound up in a messy feud with co-developer Kevin Daves, who sued and won $44 million in damages. He later settled and sold his 20 percent stake to SLAB.

The sale is expected to close in early April.