Joint Venture Borrows $403M to Buy Major Phoenix Resort
By Matt Grossman September 18, 2019 4:59 pm
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Wells Fargo (WFC) has helped fund the acquisition of a large Arizona resort hotel with a $403 million single-asset CMBS loan, as per Fitch Ratings, which analyzed the transaction.
The debt funds a joint venture’s acquisition of the J.W. Marriott Phoenix Desert Ridge Resort & Spa, a 950-room hotel in the Desert Ridge area, just beyond Phoenix’s State Route 101 beltway about 10 miles northeast of the city center. The buyers, Trinity Real Estate Investments and Elliott Management Corp., picked up the sprawling, multi-wing hotel for $602 million after coming to terms with the seller, Blackstone (BX), earlier this month.
The seven-year, fixed-rate loan has a full-term interest-only structure, and the sponsors are forbidden from taking out additional debt against the asset until they make creditors whole. Marriott will continue to manage the property throughout the debt’s duration, under an agreement that doesn’t expire until 2027.
Completed in 2002, the resort has nearly 125,000 square feet of meeting space, a 28,000-square-foot spa, four restaurants and several additional coffee shops and bars. Guests also have access to 113,000 square feet of outdoor event venues, several courts for racquet sports, five swimming pools and a river-float ride.
Blackstone bought the resort four years ago from Paulson & Co., paying $1.2 billion for a portfolio of lodgings that also included the Ritz Carlton and J.W. Marriott in Orlando. It last refinanced the Phoenix property in 2017, pulling in a $1.05 billion CMBS debt package that also included financing secured by the former Paulson properties in Florida. Since 2015, the New York City-based real estate investment giant has spent $36.6 million renovating the property, including projects to improve the facade, guest room amenities and the pools and fitness center.
Group-based travel, such as for business meetings and conventions, has dominated the hotel’s guest roster for years, responsible for around 70 percent of the Marriott’s reservations in each of the last eight years. The hotel has prospered on the back of consistent occupancy levels and steadily increasing revenues: Since 2011, revenue per available room at group-travel rates has climbed by about a quarter to $117.88, while the same statistic for individual travelers has shot up by about 40 percent. Blackstone took home $37.9 million from the property last year on pre-expense revenue of $138.8 million.
Recent years have seen Blackstone become an ever more active participant in the lodging markets both as a buyer and a seller — and nowhere more persistently than in the western United States. Bloomberg reported this week that the firm is angling to buy Las Vegas’ Bellagio and MGM Grand resorts, months after the Wall Street Journal reported that the landlord was in talks to sell another Las Vegas hotel, the Cosmopolitan. And in 2018, the company won major financings to buy properties elsewhere in Arizona, in California and in Hawaii.
