|By Jennifer Bjorhus, Star Tribune,
MinneapolisMcClatchy-Tribune Regional News
September 30, 2010 --The Grand Hotel in downtown Minneapolis has sold for $33 million -- $3 million less than what was originally discussed -- after months of uncertainty.
Pebblebrook Hotel Trust said Wednesday that it bought the 140-unit upscale hotel and that it plans to invest about $4.5 million in it over the next two years to refurbish guest rooms, the lobby and other areas. It will be managed by Kimpton Hotels and Restaurants.
"We are excited about the acquisition of one of Minneapolis' most iconic and historic hotels," Jon Bortz, Pebblebrook's chairman and chief executive, said in a statement.
Pebblebrook is a real estate investment trust based in Bethesda, Md.
The sale ends a roller-coaster chapter for the hotel, nearly a century old now and once the home of the Minneapolis Athletic Club.
The Grand Hotel, at 615 2nd Av. S., went back to the lender earlier this year in a deed in lieu of foreclosure. It was owned by Jeff Wirth, president of the Wirth Cos. Wirth, a prominent Twin Cities developer, bought the old hotel in the late 1990s and then spent millions of dollars turning it into a luxury hotel that opened in 2000. According to Pebblebrook, the hotel underwent a $50 million conversion between 1999 and 2001.
During the high years, it was a stop-off for celebrities. But hotels took a heavy beating in the downturn.
Wirth put the Grand Hotel on the market late last year. Pebblebrook revealed in government filings earlier this year that it planned to buy it for $36 million.
A few months later, Pebblebrook filed new documents indicating that it might scrap the deal because of what it mysteriously called "significant and unanticipated matters that we became aware of during our due diligence process."
Earlier this month, Pebblebrook revealed in filings that the purchase price had been lowered to $33 million because the lease of one of the hotel's tenants was renegotiated for less rent.
Wirth could not immediately be reached for comment.
The sale works out to about $236,000 a room. That's significantly higher than the $185,000-a-room price paid for the Minneapolis Hilton in May, but Pebblebrook said the Grand Hotel is an "upper upscale."
The hotel also houses a Life Time Athletic Club, Life Spa and Zahtar restaurant, all run by Life Time Fitness, which has a lease that runs through 2019, the trust said.
Pebblebrook forecast that in the next 12 months the hotel will have net operating income, after capital reserves, of about $2 million to $2.5 million.
Jennifer Bjorhus --612-673-4683
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