Text size: 
As I previously reported - a long time ago, the Rochester Holiday Inn on South Broadway is required to change its nameplate on Jan. 1.
I now have the details about that deal and the related renovation work that is going with it.
Look for that info in my column Monday.
Two Rochester downtown hotels are included in a recent mortgage default by their owner, Sunstone Hotel Investors, which many say is a symptom of this year’s foundering travel industry.
San Clemente, Calif.-based Sunstone declined to make a Nov. 1 payment on a $246.3 million loan covering 11 of its 40 hotels, including Kahler Inn & Suites Rochester and Rochester Marriott. All of the hotels remain open as Sunstone and the lender reportedly negotiate to amend the loan.
Sunstone also owns the Kahler Grand Hotel and the Residence Inn by Marriott in Rochester. They are not part of the note. Sunstone and the lender, Massachusetts Mutual Life Insurance Co., declined to comment on the default.
“A hotel’s value is based solely on its income,” says Dennis Gemberling, vice president of Perry Group International.
Perry Group is a hospitality company that advises and offers management for hotel, restaurant and lending firms, but is not involved with Sunstone. This is not the first hotel mortgage Sunstone has defaulted this year.
In June, it stopped paying the mortgage on the $96 million W Hotel in San Diego. Sunstone turned that hotel over to its lender.
In September, it defaulted on the 293-room Marriott Ontario Airport hotel in Ontario, Calif., and also gave it up to the mortgage holder.
“Defaulting on a note is sometimes a necessary strategy on the part of the borrower to re-negotiate in this current environment,” says Gemberling.
In its third-quarter earnings report, Sunstone stated it is “… seeking an amendment to the terms of this loan because it believes that the present value of the hotels securing this loan is currently less than the outstanding principal amount of this loan.
”That same report says the net book value of the 11 hotels, including goodwill, totaled $258.8 million at the end of September.Sunstone is far from alone in having mortgage problems, say industry experts.
Gemberling says two issues are driving the growing number of hotel defaults. He says hotel income is substantially down so there is simply less money available to make debt payments. That has left many hotels “upside down,” owing more on a property than it is currently worth.
He said this is part of a hotel real estate cycle and describes the current climate as very similar to the economic downturn of the 1980s, which also saw many hotel mortgage defaults.
“Unfortunately, it is a very bad cycle right now,” he said. “We are probably looking at another five to seven years before we’ll see another positive cycle.”
Here a morsel from the Olmsted Property Information and GIS database:
On Oct. 9, 2009, the 1928, two story apartment house at 730 Fifth St. S.W. in Rochester sold for $775,000.
A company by the name of Pill Hill Apartments LLC sold it to Pill Hill LLC.
Pill Hill Apartments LLC bought in 2005 for $650,000.
I may have more detail on this later.
Here's some from a piece I have in today's edition about a $750,000 upgrade/ renovation at the Fiksdal Hotel, built in 1966, across Second Street Southwest from St. Marys Hospital.
-----------------------
When it was built in 1966, the Fiksdal Hotel cost $1 million.
Now 43 years later, its owners are spending almost as much — about $750,000 — for an extensive remodel and upgrade of the interior of the 53-room hotel across from Saint Marys Hospital on Second Street Southwest.
“Sometimes when you have an old look on the exterior, people think it is like that inside,” said Blake Hoffman, a co-owner of Blue Mountain Development. “People like an ‘old home feel,’ but they don’t to go back to 1960s. They want modern amenities.”
Hoffman’s group recently recommended to the owners of the Fiksdal, Blue Stem Capital of Sioux Fall, S.D., and Glen Fiksdal of Rochester, that they re-invest “a pretty good chunk of capital into it.”
Blue Stem also owns the Staybridge Suites hotel next door to the Fiksdal.
When the green light for the renovation was given, work began with upgrading the hotel’s heating-and-cooling system and roof as well as removing the dark tint film on the windows.
“The film was all bubbly,” said Charmayne Cochran, the general manager and director of sales for the Fiksdal as well as the Staybridge Suites.
As workers on scaffolding tackled that project outside, work started inside in early October. Starting with the sixth floor, each level is shut down for a week as about 20 workers swarm through the halls and rooms painting, replacing carpet and updating the decor to current standards.
The lobby is also getting a facelift, and the hotel’s computer system is being upgraded from an antiquated DOS-based system.
Cochran and Hoffman point out that local contractors were hired and the financing was handled by a Rochester bank, Home Federal Bank.
While the inside of the hotel is moving forward in time, the exterior remains as a memorial to 1960s-style with the stylized logo and large turquoise blue panels.
Why not update the outside also?
“It’s still in good shape. I don’t know what they used, but the colors haven’t faded,” said Hoffman. “It gives the hotel some of its historic appeal. The look is pretty much its brand.”
Here's a quick snippet from Dow Jones about the Sunstone Hotel Investors, which controls four hotels in Rochester.
Actually, Sunstone has Kahler Grand Hotel, Kahler Inn & Suites, Marriott at Mayo Clinic, Residence Inn by Marriott. It also has the hotel-within-a-hotel, The International Hotel, here.
Sunstone Hotel Investors Inc. announced plans to sell at least 14 million shares, with the money going to build its stake in its operating partnership.
Sunstone has about 61 million shares outstanding, and the stock was recently down 4.8% in after-hours trading at $7.40. The news comes a day after the real-estate investment trust projected another quarter of weak results as the hotel industry continues to be hurt by falling occupancy levels and prices.
Sunstone has interest in 40 hotels, and last month agreed to return a second hotel to lenders after deciding against trying to keep up with the property's mortgage. Other hoteliers have taken the same step.
If you haven't noticed the new name or the remodeling work, Hardwick Apartments at 1804 Second St. S.W. in Rochester is now Colby Manor and the new owner is remodeling all 32 units with new kitchens and many other amenities.
Realty Growth Inc. of Rochester is managing the complex for owner Colby Apartments LLC. Dan Westendorf is directly managing the property.
I should have more on this in print soon.
Brett Wood, general manager of the hotel, says the name Macho Nacho Blues Bar and Grill was officially dropped this week in favor of a new moniker, Ron’s Place at La Quinta.
“This just seemed to hit us as good, clean and crisp, to fit with the image,” he says. “Ron’s Place fits better with the blues atmosphere.”
Ron is the owner, Ron Cary.
Another tweak is a changeover of the menu, Wood says.
“It will be more Minnesota food with a little bit of zip and a little bit of flair,” he said.
One thing that remains the same is the focus on live music. Blues will still boom out from the stage on Friday nights, Wood says. While lots of attention has been lavished on the recently revamped and rebranded Doubletree Hotel in downtown Rochester, its sister property a block south has quietly received its own makeover.
The Hilton Garden Inn at 225 South Broadway is being spruced up “from the lobby up to the seventh floor,” says General Manager Kurt Jorgensen.
In fact, the 143-room Hilton even has permit applications submitted to the city to add a bar. But don’t expect Hilton guests to be having cocktails in the proposed lounge soon.
“We are strongly focusing on getting the rooms all finished up first,” he says.
Once other parts of the hotel, built in 1999, are freshened up, it will be time to start work on the bar. Jorgensen does not expect to open the guest-focused lounge until 2010.
Traficant was convicted of racketeering, bribery and tax evasion and received an eight-year sentence July 30, 2002. He has been in custody since then. The House of Representatives expelled him.
He had a reputation on Capitol Hill for his wild hair, bellbottom pants and one-minute floor speeches punctuated with the Star Trek comment, "Beam me up."
One of the largest Rochester real estate deals so far this year — a $14.1 million sale — was for a new hotel earlier this month.
Apple Nine Hospitality, an offshoot of Richmond, Va.-based Apple REIT Cos., bought the just-completed Hampton Inn and Suites at 2870 59th St. N.W., along Bandel Road, before the first customer ever checked in.
Viking Fund Rochester, which built the 124-unit hotel, sold it.
The transaction towered over other recent Rochester deals with two sales barely topping $1 million in July and one seven-figure June deal hitting $2.2 million.
Recent Comments