Nearly $47M Renovates Hotel

Sonnenblick-Eichner arranged the $46.5 million in first mortgage leasehold and mezzanine financing for the 30-year-old, 13-story hotel, which is close to both Disneyland and the Anaheim Convention Center. The renovated property will be known as the Sheraton Anaheim Hotel at the Anaheim Resort, according to Sonnenblick-Eichner principal Elliot Eichner, who notes that the property operates on a long-term ground lease with the city of Anaheim. City officials say the lease runs until 2042.Eichner explains that the hotel will be completely renovated, repositioned and re-branded as a Sheraton, a brand of White Plains-based Starwood Hotel & Resorts Worldwide. Borrower Western Hotel Properties will also upgrade the exterior of the building and its restaurants, along with the addition of approximately 7,200 sf of meeting space. When the renovations are complete, the Sheraton Anaheim Resort Hotel will feature 490 guest rooms, 24,000 sf of meeting and banquet facilities; new restaurant and lounge; an upgraded lobby and main entrance; and an executive business center. Completion of construction is expected in mid 2006.When the property begins operating under its new name, it will be the second Sheraton in Anaheim. The other is the 489-room Sheraton Anaheim Hotel at 1015 W. Ball Rd., a little more than a mile from the Coast Anaheim Hotel. For two hotels to operate under the same flag so close to each other is unusual but not unheard of, according to Alan X. Reay, president of Costa Mesa-based Atlas Hospitality Group, a consulting and brokerage firm."It's pretty unusual to have two hotels under the same name so close to each other, but Anaheim is an unusual market," Reay tells GlobeSt.com. "There are two Holiday Inns there that are less than a half a mile apart. It is one of those things that is subject to negotiation."Reay says the conversion of the Coast Anaheim Hotel to the Sheraton brand likely will siphon off business from the other Sheraton. "When people come to Anaheim, if they're looking for a Sheraton, they're obviously going to stay at the newer product," Reay says. The Atlas president says it's not unusual for businesses near the convention center to be on ground leases with the City of Anaheim. "I think the purpose behind that is so that the city controls the land around the convention center in case it ever wants to expand the center."The financing of the Coast Anaheim was provided by one source, a Wall Street bank, according to Eichner. He says that the loan is non-recourse and represents approximately 85% of the total project costs. Patrick Brown, also a principal of Sonnenblick-Eichner, adds that "We had a tremendous amount of interest in this transaction due to the compelling upside in the turn-around and that the all-in cost of the project will be significantly below replacement cost."