A construction company that was the lone-bidder on a 300-room hotel on the far-north end of Colorado Springs now faces the difficult challenge of selling it in a depressed real estate market.
The market for the hotel is limited, said Robert Benton, a Denver hotel real estate consultant.
The only potential buyers are those with very deep pockets. And those well-heeled investors are looking for one thing, Benton said — a deal.
He’s not so sure the half-finished 11-story luxury resort hotel on the fringes of the city is a deal at more than $20 million.
Flintco, the Oklahoma-based construction contractor that was working on the hotel, became the property owner after no one bid against it at the Oct. 20 foreclosure auction in the El Paso County Sheriff’s Office. It bought the property for $22.2 million and declared a $6.6 million deficiency on its foreclosure judgment against former owner John Q. Hammons.
Flintco CEO Tom Maxwell said the company aims to sell the property and is currently working with Holliday Fenoglio Fowler, a Houston-based real estate investment marketing company.
Austin Brooks, an account manager with HFF, said his company had signed a confidentiality agreement with Flintco and that he couldn’t discuss the company’s marketing efforts.
The company’s website advertises the property with no asking price and says only that it can be “acquired at a significant discount to the original completion price… unencumbered by brand or management.”
While the hotel is being marketed “unencumbered” by branding, Marriott Hotels still advertises the property on its Web site and says it will be finished in January 2015.
Maxwell said after the Oct. 20 auction that Flintco hopes for a quick sale. The company also wants to be the one to finish work on the property.
“That would be up to the new buyer, of course,” Maxwell said. “But with our knowledge of the property and our experience we would be an asset.”
Flintco’s interest in finishing the project would make investors who have worked with the company in the past prime marketing targets for the Colorado Springs Renaissance Hotel and Conference Center.
Some of the company’s past partners include: Senate Hospitality Partners Memphis, which owns the Beale Street Westin in Memphis; Marcus Hotels, which owns the Hilton Skirvin Hotel in Oklahoma City; Mooretown Rancheria, which owns the Lodge at Feather Falls in Oroville, Calif.; and Win-River Hotel Corporation, which owns the Hilton Garden Inn in Redding, Calif.
The company’s biggest partner, however, is John Q. Hammons Hotels, which owns two Embassy Suites and another Renaissance property listed on Flintco’s Web site.
Justin Harris, senior vice president and general counsel for John Q. Hammons Resorts & Hotels, said before the auction that the company could bid on the property and that if it did buy the project, it would finish it as a John Q. Hammons Renaissance hotel.
Harris was out of the office during the week following the auction and could not be reached for comment.
Flintco’s lawsuit was against John Q. Hammons, himself, because he fronted $47 million to build the hotel personally before he ran out of funding in the fall of 2009. He also said he was going to secure $70 million of borrowed finances in the spring of 2010.
Construction never resumed, and 92-year-old Hammons fell ill and ended up in a nursing home.
Hotel real estate consultant Benton said he heard rumors circulating before the auction that Flintco had already worked out a deal for the sale of the property. Those rumors circulated, unconfirmed, locally as well.
But no one bid on the property at the auction, and no buyer was announced as of press time.
Benton said he was surprised by the rumors because the market is not conducive to a quick or easy sale.
“It’s very difficult to find financing for hotels in comparison to other real estate because the cash flows have a little more risk to them than other real estate,” Benton said. “It’s going to have to be a well-funded buyer.”
Benton said that most banks will only loan on properties with performance histories. This is a particularly difficult market for speculative loans, he said.
Most Real Estate Investment Trusts also want to put their money into known products that are already performing and have a history.
While there are probably buyers out there for the Hammons hotel, they will have to be cash buyers and gamblers – and there just aren’t a lot of those around these days, he said.
Maxwell said he was in the building the day before the auction and that it’s in good shape. He said Flintco spent extra money to finish the exterior before abandoning the project so it would be weather-tight.
“It definitely looks more finished on the outside than it is on the inside,” Maxwell said.
Little is completed on the inside and it will take a substantial investment from an investor to finish it.
“There is a lot that need to be done,” he said.