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PHOENIX-A sunnier outlook for Arizona’s hotel industry has prompted Insignia/ESG to expand its Hotel Partners division to include a Phoenix office in an expansion bid.

Stanley Kozlowski will come from the Newport Beach, CA office to head up the new division. Richard Carlson, also coming from Newport Beach, is the managing director. The new division kicks off this month. “We haven’t had a hotel division over there,” Kozlowski tells GlobeSt.com. “It makes a lot of sense. If you look at the Phoenix area there are a lot of national companies with hotels in Phoenix. It makes sense to be on the ground near them.”

Arizona is just beginning to recover from the period of overbuilding, which drove down occupancy rates, room rates and the number of overall sales of properties. In 2000, the occupancy rate in Arizona had increased 1.7%, up to 61.6%, and the average daily room rate had hiked 2.3% to reach $87.36 per night, according to Warnick & Co., a Scottsdale-based hospitality industry consulting firm.

The last two years have seen a decline in investor interest in Arizona properties. In 1999, there were just 11 transactions totaling just over $100 million and in 2000, if the $335 million sale of the Arizona Biltmore is excluded, there were just six sales totaling just over $42 million.

While Kozlowski doesn’t expect a sales boom, he does anticipate more investor interest in Arizona’s hotel market. He predicts that very little new development will occur, which will only increase demand on the existing properties. “Arizona has recovered significantly from its previous rate of overbuilding,” he says. “Due to the careful containment of speculative development, we believe the existing property market will continue to improve, making Arizona an increasingly interesting opportunity.”

The Hotel Partners, which was purchased by Insignia/ESG in 1998, is one of the most active in Insignia/ESG’s Western Region, having closed more than 40 transactions with a value of more than $516 million in the past three years.

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