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Headwinds ahead?


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  • | 11:00 a.m. October 28, 2016
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It could be argued that Tampa physician and real estate investor Dr. Kiran Patel got a sweet deal on the Sarasota Hyatt Regency Hotel and its related furniture and equipment at the price of $75 million.

After all, New York investment firm Blackstone Group paid $65 million for the 294-room property in May 2007 — and then promptly sank another $22 million into it to land the “Regency” flag.

Perhaps even more significantly, Patel's Sarasota Hotel Acquisition Group LLC's purchase earlier this month comes amid tourism gains throughout the Gulf Coast, a
trend that has resulted in several multimillion dollar lodging property transactions during the past three years.

But area hospitality analysts say the Hyatt Regency almost certainly will face headwinds going forward, both because of heightened competition from new properties about to come online in the area and from its own age and architecture.

As a result, Patel's group may have to invest millions more into the Hyatt Regency to keep the 41-year-old hotel among the top-tier lodging properties in Sarasota.

“Sarasota has been under hoteled since the recession, but several new properties are about to solve that problem,” says Kent Schwarz, an executive vice president and lodging industry specialist with commercial brokerage firm Colliers International Tampa Bay.

“The hotel market along the entire Gulf Coast has been strong for more than three years now, but tough competition is ahead, and the Hyatt is no longer the newest hotel in town.”

The Hyatt Regency sale comes as 850 new hotel rooms in Sarasota's downtown are set to debut or have recently come online, including a 255-room Westin; a 139-room aloft Hotel; a 200-room Embassy Suites & Spa; and the 163-room Hotel Sarasota, which will carry the Curio by Hilton banner.

And more projects may be on the way, analysts predict, as travelers move toward niche product and more boutique hotels that offer unique experiences.

“The Hyatt has very good real estate,” says Lou Plasencia, head of the Tampa-based The Plasencia Group, a hospitality consulting and brokerage firm.

“And it's on the water, that's a big plus. There's a lot of residential surrounding it, too, and that's good. But with all the new development coming in, the Hyatt Regency risks becoming a second-tier property in that market. It needs a lot of capital.

“They paid a full price for that property of that age and in that area,” Plasencia adds. “It will be increasingly difficult, I think, for the Hyatt to compete against the existing projects that are underway now and those that may be announced in the near future.”

Patel did not return several telephone calls for comment on the future of the Hyatt Regency, and general manager Bruce McDonald says details will be forthcoming.
Commercial brokerage firm Holliday Fenoglio Fowler LP, whose Tampa office represented Blackstone in the transaction, also declined to comment.

But both Schwarz and Plasencia agree that Patel has a proven track record of success in the lodging business, and the Hyatt Regency could benefit from his ownership.

Patel, who founded and chaired WellCare of Florida, has been a real estate investor for more than a quarter century. He owns a 700-room Wyndham hotel in Pittsburgh and a 241-room hospitality property in Tucson, Ariz.

But his most ambitious hotel to date is set to open early next year on Clearwater Beach. The Wyndham Grand Hotel & Beach Resort will contain 450 rooms and a raft of Class-A amenities.

“He has a track record and he's able to get things done,” says Schwarz.

“He's been a contrarian player in the past and it's served him well,” says Plasencia. “He likes overlooked opportunities, and he's not afraid to try daring things. At the Hyatt Regency, he's getting the hotel for well below replacement cost and he's getting some very valuable underlying real estate.”

The deal comes amid one of the hottest hotel markets in Gulf Coast history, as well. Earlier this year, CrossHarbor Capital Partners invested $101 million to buy the 520-room Tampa Hilton, a deal that capped a flurry of investor interest regionally.

Schwarz and others, however, note that the lodging market has cooled somewhat in 2016, after several years of price increases among properties.

“The hotel market in Florida remains active, but we're seeing a bit of a transition,” Schwarz says. “I'd say the market is now normal.”

But in keeping with his contrarian past, Patel may decide ultimately that the Sarasota Hyatt Regency shouldn't even try to keep up with the slate of new hotel products
coming online. Plasencia maintains that even taking the drastic step of razing the hotel may be the most fiscally prudent move.

“In the long run, I think Mr. Patel may have bought himself a very valuable piece of residential land,” Plasencia says.

- K.L. McQuaid

 

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