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Commercial Real Estate
Business Observer Friday, Mar. 1, 2019 2 months ago

To Renovate or Sell?

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California company faces a choice in its plan to upgrade a Sarasota hotel to a Four Points by Sheraton
by: Kevin McQuaid Commercial Real Estate Editor

Talk about a fork in the road.

A long-awaited renovation and rebranding of a Sarasota hotel by its California owner appears imminent — unless it decides instead to sell the property instead.

Daus Investments has planned since mid-2016 to temporarily shutter the Baymont Inn & Suites and add restaurant and meeting space, interior corridors and two floors to a portion of the 99-room hotel to reconfigure rooms.

Ultimately, it would then rebrand the revamped five-story hotel as a Four Points by Sheraton, a midline brand that competes with Hilton Hotel Corp.’s Hampton Inn & Suites line.

Hotel staff has been telling guests of late that the $9 million renovation would start in May and take roughly a year to complete.

“It’s definitely going to happen in 2019 but we don’t know exactly when,” says Lana Powell, the hotel’s general manager. “There’s been talk about beginning in May, but we haven’t pulled any permits from the city as yet, so we can’t be certain.”

City officials approved the project in March 2018, two years after Encino, Calif.-based Daus — an affiliate of Land Developers & Associates Corp. — acquired the former Best Western hotel at 1425 S. Tamiami Trail for $6.5 million.

But Land Developers & Associates’ President Daniel Singh has apparently had a change of heart about the renovation. In mid-February, Daus hired Sarasota commercial real estate brokerage firm Ian Black Real Estate Partner Jag Grewal — who also brokered the March 2016 deal for the property — to list the hotel for sale.

Daus is asking $9.5 million for the hotel on an “as is” basis, according to listing information.

“The owner has the entitlements in place and an awful lot else on his plate at present, several hotel projects in the works in Florida and elsewhere, along with other developments, so he doesn’t know if he wants to take a project of this complexity on at the present time,” says Grewal.

“Essentially, he’s interested to see if someone else would be interested in owning a renovated hotel in Sarasota at less than $200,000 a door, which would be an incredible deal,” Grewal says. “It’s really a great project all around.”

Jag Pathirana, Land Developers & Associates’ CFO, referred inquiries regarding the Baymont Suites to Singh, who did not return telephone calls for comment.

Land Developers & Associates certainly has been active here and elsewhere.

In addition to the Sarasota hotel, the company also owns the 108-room Best Western Airport Inn in Fort Myers; a Fairfield Inn & Suites in Temple Terrace; and a Hampton Inn & Suites in Brandon, among others.

The company also has been in both the disposition and repositioning modes in recent years.

In December, it sold the 76-room La Quinta Inn & Suites Airport hotel in Fort Myers for $7 million — $2.5 million more than another Land Developers & Associates’ entity purchased it for in July 2015, records show.

Singh is no stranger to Four Points’ conversions, either.

In 2012, it bought the former 110-room AmericaInn in Fort Myers for $5.3 million and converted it to a Four Points by Sheraton the following year, after a similar capital program to the one being contemplated in Sarasota.

Land Developers & Associates also develops new hotels at times. In March 2017, the company proposed building a four-story, Four Points by Sheraton on a 1.45-acre tract on the Island of Venice, at 775 S. Tamiami Trail.

The company ultimately backed away from the four-story project, however, amid community opposition.

Singh also has considered a 180-room lodging project in Puerto Vallarta, Mexico, that would be combined with 200 condominiums, and new Hampton Inn & Suites hotels in Simi Valley and Pomona, Calif., according to company data.

Kent Schwarz, an executive vice president at commercial real estate brokerage firm Colliers International Tampa Bay who specializes in hospitality properties, says converting the Baymont to a Four Points could have considerable benefits.

A similar upgrade to a Destin Hampton Inn, which was valued at $58,000 per room in 2003, prior to a renovation, was valued at $242,000 per room in 2018 after the renovation that included adding interior corridors had been completed.

Room rates would likely rise significantly, as well, to offset the $9 million development costs.

Baymont Inn & Suites’ rates in Sarasota are between $80 and $140 per night, according to priceline.com, which tracks hotel room rates. Four Points by Sheraton room rates, by contrast, are in the $239 to $279 per night range.

“If they were to renovate, they would have to do something pretty extensive,” Schwarz says. “Four Points typically requires an interior corridor before they would put their flag on a property.”

But such a move would also be an upgrade in the quality of the offering, he says.

“In recent years, Starwood (Hotels & Resorts, Sheraton’s owner) has done a good job of repositioning the Four Points brand, and that brand now has even more credibility with Marriott (International Inc.) buying and incorporating Starwood into it.”

He also contends a conversion of the Sarasota Baymont would succeed baed on its location.

“Sarasota Memorial (Hospital) is right there, and families of hospital patients often want a clean, comfortable and safe place to stay that’s as close as possible, and other than the Baymont, there’s really nothing else nearby,” he adds.

“And on top of the hospital, that property is minutes away from Siesta and Lido beaches and St. Armands Circle and other attractions,” Schwarz says. “Mr. Singh and his team have been very effective, because they’ve purchased properties right and either repositioned them or renovated them to get their numbers up. They’re very smart people.”

If the Baymont is eventually renovated, it would mark the second time in recent years that ownership has invested in the hotel. Five years ago, then-owner Charter One Hotels & Resorts spent roughly $700,000 to upgrade lighting, parking and amenities at the hotel.

“We’re really excited about the prospects for the renovation,” Powell says. “We definitely think the newly renovated hotel will be a great addition to the area with its location across from Sarasota Memorial.”

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