"The thinking is that if the market is slower, you have less disruptions to the hotel if you do renovations during that period," Peter C. Lewis, president and chief investment office with Madison W, tells GlobeSt.com. "You can also shave 20% to 30% off labor costs, because labor and material is cheaper."

Further impetus was that Lexington will host in September 2010 the World Equestrian Games, an international event which is expected to bring 300,000 visitors to the city. "We want this hotel ready to showcase because we are going to have international clientele," Lewis says. "When they leave, they can talk about us and bring in new business."

The hotel is connected by skywalk to Lexington Center, a sports and entertainment complex which includes Rupp Arena, Lexington Conference Center and The Shops at Lexington Square. Occupancy rates at the hotel have historically averaged in the low-60s, Lewis says.

"We think there's an opportunity to push that up to the high-60s or low-70s," he says. "Lexington is a nice stable market, and between the Kentucky Derby, the University of Kentucky and the Rupp Arena, there's a consistent base of built-in traffic. It's a nice tertiary market with a great quality of life, and over the next decade, these cities are going to be the ones that thrive."

Work will be performed on the lobby, guestrooms, and the Cafe on the Park restaurant on the hotel's first floor, all of which will be updated and decorated with a Kentucky countryside and equestrian theme. "We're looking to tie the hotel closer to the Lexington community," Lewis says. "It's really the horse capital of the world, so there's going to be a more overt reference to that. A common theme is just embracing the culture of where we are located."

Madison W also plans to add lighting to the building. "It's a prominent part of the skyline," Lewis says. "We want to make sure it's not a mystery at night and that people know it's there." All of the renovations are expected to be completed by year's end.

Along with the hotel, Madison W also purchased a 250,000-square-foot neighboring office building last year. The property, which was built in the early-1990s, is about 75% leased and will undergo about $500,000 in renovations, upgrading some of the building's systems and elevators. Asking lease rates in the building range from $17 to $19 per square foot, according to Lewis.

"We are in a market that is 90% leased on average," Lewis says. "A major tenant moved out a few years ago and the office building has been slowing creeping up in vacancy ever since. There's a huge tenant base we can grow with in this economy and increase our tenants."