Servicer Sells Distressed Northland Inn to JV

BROOKLYN PARK, MN-The 231-suite Northland Inn  hotel, foreclosed on last year, has been sold to a joint venture of Providence, RI-based Hotel Asset Value Enhancement and a fund managed by Fidelity Real Estate Group. Jones Lang LaSalle Hotels handled the sale for Helios AMC, a special servicer.

The 20-year-old hotel had trouble meeting its loan agreement, says Adam McGaughy, an EVP with JLL, and has been less than 60% full in recent months. However, the property is the only all-suite conference center hotel in the Minneapolis market, with an eight-story atrium, and has 33,000 square feet of dedicated conference space.

The price was undisclosed, and McGaughy says a report of a $2.5 million appraisal was incorrect, though he confirmed the property had a delinquent $20.5 million mortgage. Column Financial was the mortgage holder, and Parkland Hotel Investors was the developer and prior owner that walked away from the property.

McGaughy tells GlobeSt.com that the buyers are looking to spend likely about $35,000 per key on renovations. “They’re researching their alternatives, potentially rebranding as a Marriott or Hilton,” he says. StepStone Hospitality, a subsidiary of Hotel Asset Value, will manage the property.

McGaughy’s company recently handled another prominent sale in the market, the $33 million disposition of the Grand Hotel. The two deals are trading because of the bifurcation, one a prominent, core asset chased by REITs and the other a distressed hotel sought by investors chasing low-key-price deals, he says.

“We’re at a strange point in the market, it’s a seller’s market to a degree. There’s lots of capital looking to make a play for hotel space, and not a lot of product,” McGaughy says. Minneapolis is also coming off an unusual time, following the 2008 Republican National Convention when hotels sprang up and then occupancies lagged due to the oversupply. “Now demand has picked up quite a bit, with occupancy gaining traction, and that should help push the daily rate. Also, the city is rebounding better than most Midwestern cities,” he says.