14 months later, is sale of Phoenix’s hotel dead?

Reason for delay in deal for Sheraton are unclear

More than a year after Phoenix accepted a $300 million offer to sell the Sheraton hotel downtown, the city has yet to close with the buyer.

The unexplained delay in the sale of the most expensive asset Phoenix has on the market is raising a question: Is the deal dead?

The City Council authorized the sale of the hotel to investors in February 2016, and the deal was expected to close in about four months. But the status of the sale is a mystery.

City officials aren’t giving many clues as to why the taxpayer-owned hotel remains on its books.

When asked last week, the principal players involved seemed to have different takes on the situation. Phoenix

and the buyer said they were still negotiating, but neither side would say what was causing the holdup or when the deal might be done.

City, buyer tight-lipped

Jeremy Legg, a special-projects manager for the city’s convention center, is negotiating the sale for Phoenix. He said the city has “no news to report relative to the sale.”

“It’s been much longer than I would have liked,” Legg said. “But I don’t want to count anyone out if they haven’t told me that they’re no longer interested.”

The proposed buyer is TLG Phoenix LLC, an investment company based in Florida.

Lee Pillsbury, a well-known lodging investor who heads the company, struck an optimistic tone last week. He said a year is “not an unreasonable period of time at all” given the complicated nature of the deal.

“We continue to be in discussions,” Pillsbury said. “We’re hoping we can reach an agreement at some point. The important thing is to get it right.”

But Phoenix Mayor Greg Stanton seemed to throw cold water on the situation.

“Phoenix stands ready to make a deal when we find the right private-sector partner that can meet our needs and theirs,” Stanton said in a statement. “This is an appropriate time to move, and when the timing is right the private sector will act and we will make a deal.”

Stanton, who voted to build the hotel, did not clarify whether that statement means the city is looking at other potential buyers.

Meanwhile, the city has redacted emails about the situation that were sought by The Arizona Republic through a public-records request. The messages appear to refer to the projected balance of a multimillion-dollar fund for hotel improvements. That money could go to the buyer — if the deal closes.

The city wants to sell the Sheraton Grand Phoenix, a 31-story tower with 1,000 rooms, so it can get out of the turbulent hotel business and free up tax revenue to invest in other projects, such as a potential new arena for the Phoenix Suns.

Since the hotel opened in the middle of the Great Recession in 2008, it has lost tens of millions of dollars. The city subsidized those losses, draining money officials could have spent on a sports arena or city services.

Phoenix owes about $306 million on the Sheraton after taking on $350 million in debt to fund construction of the hotel.

Denise Olson, the city’s chief financial

At the same time city officials are saying little publicly about the deal, Phoenix isn’t releasing some financial information related to the hotel.

Late last year, The Republic requested emails between the city and the buyer. The city redacted those emails to remove information showing the projected balance of the hotel’s capital expense fund, which pays for building upgrades or refurbishments.

The fund contains millions of dollars that could go to TLG Phoenix if the deal closes.

Under the terms of the sale council members accepted last year, the company would receive the hotel’s capital replacement fund. City officials said the balance of the fund is about $12 million but would not release its projected balance for future years.

The Republic asked the city to provide a rationale for redacting the emails.

A city spokeswoman said releasing that forward-looking financial information “would not be in the city’s best interests: for example, it would give the hotel’s competitors an unfair look at the hotel’s future capacity to pay for renovations.”