Friday, June 20, 2014

North Scottsdale Resort Sold for $52m

By: Paul Dionne |

The Zona Hotel and Suites in Scottsdale was sold yesterday for $52m or $120,650 per key in an all cash deal that included $7.28m in furniture, fixtures and equipment. The buyer was Kissimmee, Florida-based hotel operator Orange Lake Resorts, which is strategically allied with International Hotel Group—parent company for Holiday Inn. The seller was Vancouver, BC-based hotel investor, Sunstone Realty Advisors, who acquired the property three and a half years ago for $32m from lenders.
The Zona Hotel and Suites
The 431-key resort sits on 11.91 acres west of the southwest corner of Princess Boulevard and Hayden Road in Scottsdale. The property totals 142,174 ft2 in seventeen 3-story buildings and features four resort-style pools. The resort was built in 1987 and underwent major renovations in 2007 and 2011. Rooms range in size from 275 ft2 guest rooms to 1,200 ft2 four bedroom suites with an average two-bedroom room size of 600 ft2.

The Zona Hotel was acquired from its original developer by a joint venture between Whitehall Street Global—an affiliate of Goldman Sachs—and Trinity Hotel Investors for $77m in late 2005. At that time there were 483 rooms and the property was slated for renovation. To that end, Whitehall and Trinity secured $45m in new debt with Lehman Brothers in early 2006 and an additional $95m with Capmark Bank in mid-2007. By June of 2009, the property had been noticed for trustee sale on the Capmark note and the property reverted to Capmark deed-in-lieu in October of that year.

As mentioned above, Sunstone acquired the property for $34m with $13.6m down and $22.4m new debt with Capmark, comprised of a $20.4m “A” note and a $2m “B” note with sale. The $52m sales price represents an unlevered return of 52.9% or 15.5% annualized, a levered return of 282% or 80.6% annualized and a cash-on-cash return or 117.6% or 33.6% annualized—ignoring operational proceeds and costs.

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