Orange County Business Journal
10/15/18

HOSPITALITY: $415M VALUE ESTIMATED FOR SHERATON
Eagle Four Takes Flight to Denver in Big Hotel Buy
By Mark Mueller

Monday, October 15, 2018

http://www.ocbj.com/news/2018/oct/15/eagle-four-takes-flight-denver-big-hotel-buy/

Newport Beach-based hospitality investor Eagle Four Partners is the latest local name taking notice of Colorado’s red-hot hotel market.

Eagle Four announced the purchase of the 1,231-room Sheraton Denver Downtown Hotel last week, currently the largest hotel in Colorado by room count.

The property is in the city’s financial and business district. It has 133,000 square feet of events meeting room space, plus several on-site restaurants, among other amenities.

It was built by renowned architect I.M. Pei in 1960 as a Hilton property. It’s seen several rebrandings since then, and was turned into a Sheraton a few years ago.

Eagle Four bought the hotel in a venture with Atlanta-based High Street Real Estate Partners; it’s the first deal involving the two privately held investors.

The property was purchased from Chartres Lodging Group LLC of San Francisco on undisclosed terms.

Officials with Irvine-based hotel brokerage and consultancy Atlas Hospitality Group said the hotel was appraised at $415 million in 2016, or roughly $337,000 per room.

Chartres Lodging Group paid a reported $176 million—roughly $143,000 per room—in 2007. Three years ago it sold the land underneath the property for $210 million.

The deal fits into Eagle Four’s wheelhouse, according to Kory Kramer, a partner with Eagle Four.

“Our investment strategy is opportunistic, seeking hotel assets in top-tier markets with excellent locations and long-term growth potential generating strong and consistent returns,” said Kramer, whose company’s local portfolio includes Huntington Beach’s Paséa Hotel & Spa, as well as the Balboa Bay Resort, Balboa Bay Club, and Newport Beach Country Club in Newport Beach.

Along with Kramer, Eagle Four’s executive team includes principals Kevin Martin and Todd Pickup.

Todd is the son of Richard “Dick” Pickup, one of Orange County’s wealthiest businesspeople and a longtime investor in area businesses and real estate-related deals, including some involving Eagle Four. Martin is Dick Pickup’s son-in-law.

Kramer joined Eagle Four this year. He previously served as chief investment officer for Irvine-based Pacific Hospitality Group, a hotel investor and operator led by Tim Busch that partnered with Eagle Four on a number of deals over the past decade.

Pacific Hospitality wasn’t part of the Sheraton Denver deal.

Strong Market

The new owners of the hotel “look forward to being an integral part of the downtown community,” Kramer said in a statement.

A planned renovation will coincide with Marriott International’s relaunch of the Sheraton Hotels and Resorts brand, the third-largest brand in its portfolio, the company said.
The Sheraton’s new owners said in a statement that they plan to renovate the hotel’s guest rooms and public spaces to position it as the city’s “trophy group meeting and events hotel.”

The hotel is about to get more competition for that title; a 1,500-room hotel closer to the Denver International Airport will open by the end of this year, according to local news reports.

In addition to eclipsing the Sheraton as the city’s largest hotel, Gaylord Rockies Resort and Convention Center will have 485,000 square feet of meeting space.

Denver’s hospitality market is “one of the nation’s hottest markets,” High Street President Justin Wilson said.

Brokerage data backs up that claim.

Demand for hotels in Denver and surrounding markets is projected to grow 5.1% this year, well above the national average of 2.1%, according to data from CBRE Group Inc.

CBRE’s forecast for Denver hotel occupancy this year is 74%, about eight percentage points higher than the national rate.

Other OC-based hotel operators appear to be paying attention to the trends.

The Business Journal reported in September that Newport Beach-based hotel developer T2 Hospitality bought a second parcel in downtown Denver for a potential project; it first invested in developable land in the area in 2015.

Both parcels are currently parking lots in “LoDo”—lower downtown—a historic neighborhood marking the city’s original borders that’s seen recent urban reinvestment.

T2 Hospitality is affiliated with the development and investment activities of Tushar Patel, chairman and founder of Tarsadia Investments LLC in Newport Center.

Patel is a longtime OC hotelier and developer.

About an hour south of Denver in Colorado Springs, San Clemente-based Alpha Wave Investors rebranded a boutique hotel it owns under its Soul Community Planet line, which is intended to provide “holistic hospitality,” sustainable living and wellness elements to hotel offerings.

Alpha Wave is headed by Ken Cruse, the former chief executive of Sunstone Hotel Investors Inc., a hospitality REIT in Aliso Viejo.

The OC-to-Denver connection in the hotel industry also goes the other way.

Dana Point’s swank Monarch Beach Resort is owned by Denver-based KSL Capital Partners LLC, a private equity firm that bought the property in mid-2014 when it was the St. Regis Monarch Beach Resort.

That 400-room resort was recently appraised at about $466 million, or about $1.1 million per room. KSL recently refinanced the hotel’s debt, and took out a new $340 million loan.