Strategic Hotels and Resorts' 642-room Fairmont Scottsdale Princess hotel in Arizona asks city for rent cut to help fund expansion, maintenance; property was purchased at market peak for US$360M
May 31, 2011
– Chicago-based Strategic Hotels and Resorts may get a new deal for its 642-room Fairmont Scottsdale Princess hotel being leased from the city of Scottsdale, Arizona, in an attempt to reduce its debt and build new meeting space, The Arizona Republic reported May 31.
The city is willing to cut the base annual rental fee to US$1.4 million for 2011 through 2014, and the hotel would pay an additional 1.25% to the city for any annual revenue totaling more than $70 million.
Its ground-lease fee has averaged $1.34 million a year for the past 10 years, peaking at a high of $1.9 million in 2006-2007.
Strategic Hotels purchased the hotel at the peak of the market in 2006 for $360 million and has so far invested $60 million, with an additional $25 million to be invested in 57,000 square feet of new convention meeting space.
According to Bill Murney, senior VP of hotel brokerage HREC Investment Advisors, it would be smart for the city to give temporary concessions in the land lease to enable the hotel chain to invest in the hotel and maintain its high standards while recovering from the economy and slowdown in corporate travel, according to the publication.
The hotel posted a $35 million loss in the first quarter, and according to Paul Katsenes, Scottsdale’s director of community and economic development, is expected that the deal will provide some relief to prevent bankruptcy or foreclosure, The Arizona Republic reported.
The primary source of this article is The Arizona Republic, Scottsdale, Arizona, on May 31, 2011.