News for the Hospitality Executive
|By Al Gibbs, The News Tribune, Tacoma, Wash.
Knight Ridder/Tribune Business News
Mar. 11, 2004 - The Sheraton Tacoma Hotel, a Broadway Plaza landmark since it opened 20 years ago, is for sale.
Asking price: $36 million.
"This is a unique moment in time, with low interest rates, the economy's beginning to recover and there are a number of hotel companies out there looking to buy," said Mark Matthews, the hotel's general manager.
"With Tacoma's (downtown) recovery, it seems like an opportune time to see what kind of price we can get."
If no offer is right, or if a potential buyer can't be found by around mid- to late summer, the hotel might go off the market, he added.
"We don't have to sell it," he said.
The sale attempt is being handled by the Seattle office of Colliers International.
Several Tacoma commercial real estate brokers said they hadn't heard of an attempt at selling the hotel.
"But thanks for letting me know," said Ted Johnson of Simon-Johnson. "I'll get right on the phone."
Although the City of Tacoma holds the right of first opportunity to either bid on the hotel for itself or for an independent operator, it probably won't, said Martha Anderson of the city's economic development department.
Tacoma would receive a bit more than $10 million from the sale to repay loans it has made to the operator, Anderson said.
But income it now receives from hotel operations -- one-third of the company's net profits; $475,000 last year -- would cease.
"That will go away unless the new owner negotiates a new loan," she said.
Portland's Gordon Sondland owns half of the Sheraton Tacoma and other investors -- none from the Tacoma area -- own the other half.
The hotel is managed by a subsidiary of Kimpton Hotel and Restaurant Group LLC, a San Francisco company that manages 39 hotels and 42 restaurants.
Kimpton is the largest "boutique" hotel operator in the United States, Matthews said.
The Sheraton Tacoma, at 25 stories, 330 rooms and only 10 suites, doesn't qualify as "boutique."
Also, while the investment partners receive two-thirds of the net profits, most of that cash either goes to pay off mortgage loans or upgrade the facility.
"It's absolutely not correct," Matthews said, that the hotel is in financial trouble, as it was from its opening until the early 1990s when it was rescued from bankruptcy.
"We've stepped in and stabilized it very well," Matthews added.
He said the hotel's occupancy rate was about 60 percent, but others said occupancy was far lower at times.
The hotel was built in 1983 and 1984 at the corner of South 13th Street and Broadway Plaza by Cornerstone Development Co., a subsidiary of Weyerhaeuser Co.
Besides its rooms, it contains two restaurants and three lounges, with banquet seating able to handle about 625 people. The lobby atrium is four stories high.
The hotel also managed the next-door Bicentennial Pavilion, which was owned by the city. Those arrangements continue to this day.
"This is one of the most complicated operating agreements I've ever seen," Matthews complained good-naturedly.
In the first 10 years of operations, the hotel ended up without enough income to pay off some $52.8 million in loans. Cornerstone spent $25 million in the hotel's first nine years just to keep the facility afloat.
Cornerstone said that was all it would spend, and wrote off $25 million.
The hotel -- soon to be owned by Sondland and the other investors -- lost about $4 million a year in 1991 and 1992, and then negotiated a $5.1 million loan to stay out of bankruptcy court.
What if no buyer shows up by this summer?
"The window of time may be longer than that," Matthews said, although a buyer presumably would like to have control of the facility by the start of winter when a hotel's big convention season gets under way.
"We don't need to sell," Matthews added, "but we'd like to take a look at the possibility."
THE HOTEL AT A GLANCE
--Price: $36 million
--The hotel: 25 stories, 330 rooms, 10 suites, various meeting rooms, dining facilities, four-story atrium
--Construction began: 1983
--Current owners: Gordon Sondland of Portland owns half; other investors, none from Tacoma, own remainder.
--Current management: A subsidiary of boutique-hotel experts Kimpton Hotel and Restaurant Group LLC, which manages 39 hotels and 42 restaurants
--Handling the deal: Colliers International
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(c) 2004, The News Tribune, Tacoma, Wash. Distributed by Knight Ridder/Tribune Business News. HOT, WY,