VOL. 132 | NO. 70 | Friday, April 7, 2017
City's Largest Hotel Changes Hands In Latest 'Gateway' Puzzle Piece
By Bill Dries
The 600-room Sheraton Memphis Downtown convention center hotel is changing hands to a new joint venture in a deal that's been in the works since August.
The largest hotel in the city by room count is changing hands in what is a key part of the city’s effort to remake the Memphis Cook Convention Center as a part of a larger “Gateway project” in the general convention center area.
The Sheraton Memphis Downtown convention center hotel went on the market last year and the partnership that surfaced Thursday, April 6, began its due diligence for the transaction in August.
The deal to transfer the 600-room property from Host Hotels & Resorts LP to LMS Real Estate Investment Management LLC, a newly-formed liability company, showed up in paperwork for the April 11 agenda of the Center City Revenue Finance Corp.
The LLC is a joint venture between Starwood Capital Group, a private investment firm from Greenwich, Connecticut, and Schulte Hospitality Group, a management company from Louisville, Kentucky.
“Schulte and Starwood are excited to be part of the redevelopment of downtown Memphis and the neighboring Pinch District,” reads the letter to the CCRFC. “The (joint venture’s) strategy for operating the hotel is to retain the existing staff, improve operational efficiencies as we have at the other 80 hotels we manage, and leverage our in-house sales and revenue management teams to drive more business to the hotel.”
The letter also says the joint venture is “securing a franchise license agreement from Marriott.”
The CCRFC will vote April 11 on the transfer of the payment in lieu of taxes agreement for the property to the new owners. Technically the CCRFC owns the property in order to get the property tax abatement with ownership reverting at the end of the term of the PILOT agreement. LMS is buying the leasehold interest in the hotel.
The change in ownership is on the Memphis City Council’s agenda for a discussion Tuesday, April 11, in committee.
The property went on the market with the administration of Memphis Mayor Jim Strickland watching the transaction closely.
The hotel changes hands as the city prepares to begin an estimated $60 million in renovations to the Memphis Cook Convention Center, which the hotel is connected to. And Strickland is seeking a coordinated plan for the larger area that he has branded “The Gateway.”
It includes private mixed-use development leveraged by city funding of infrastructure improvements of the nine-block area between the Pyramid and the campus of St. Jude Children’s Research Hospital, which is north of the convention center and hotel.
City chief operating officer Doug McGowen told The Daily News last month the hotel which began as a Crowne Plaza, became a Marriott and currently is a Sheraton is an essential part of the convention center upgrade and a move by the city to field proposals for a second convention center hotel.
Denver developer and financier Robert Swerdling has proposed several versions of a 600-room hotel at Front Street and Poplar Avenue where the the Mud Island parking garage is currently. Word of the proposal surfaced in January. Since then Swerdling has changed and refined his proposal after Strickland said the city will not pay to build or be the owner of such a hotel as Swerdling originally proposed.
There has been at least one other proposal for a new convention center hotel.
McGowen said the city wants to make sure a new hotel would work with the original convention center hotel and the convention center itself. That includes talking with the new ownership group of what is now the Sheraton convention center hotel.
“When that new ownership group closes, we will have a very early conversation with them to say, ‘We are investing a significant amount of money to bring the convention center up to modern standards and we would hope this new ownership group would similarly invest in the Sheraton hotel to bring it up to similar quality,” he said in March.
The joint venture plans to close on the hotel deal April 19.