"In 2001, the hotel held its own, but in 2002 and 2003, those were down years, so there was no increment created," Walter Isenberg, president and CEO of Sage, explains to GlobeSt.com. Had there been a TIF created, it would have generated money that could go toward the improvement of the hotel.
Citigroup Property Inc., or CPI, will be the majority owner, but Sage will be the general partner and an equity investor in the hotel. Isenberg declined to release the purchase price of the hotel, but says the renovation cost will be "substantially more" than the purchase price.
"The renovation will probably cost more than the purchase price by more than a factor of two," one person familiar with the deal tells GlobeSt.com. "Really, this is a phenomenal deal. It's a much better deal than the one that was approved by the council in November 2001."
Four years ago, the city expected to issue certificate of participation (COP) bonds. However, with bond financing, the credit of the city could be at risk if the developer defaulted or missed payments. Under the current DURA resolution, the Sage-CPI group pays for all of the improvements up front and pays all of its taxes. DURA, then, receives some of the taxes back from the city, and in turn refunds them to the Sage group. The TIF district for the hotel is in effect for about the next 20 years. However, if the market booms and the hotel generates a lot of income, it could pay off the TIF earlier, Isenberg notes.
Isenberg says the hotel will target the same market of a Holiday Inn. "This is a value hotel," Isenberg says. "This is a market that is underserved in Downtown Denver."
As a part of the renovation, the lava rock on the exterior will be removed and there will be a lot of glass used. The HVAC system also will be upgraded and brought to code, and the 337 rooms will be enlarged.
Earlier in the year, LNR sold the top 14 floors to the Auraria Foundation to be used as student housing for the nearby Auraria college campus. The housing is no longer part of the hotel and will have a separate entrance. The revamped hotel is scheduled to open in October 2006, while the student housing is scheduled to open next August. Locally based Newman Cander & Doane is the architect for the hotel.
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