Hotel & Resort Beat

Marriott set to open village near Mickey and friends Construction is nearing completion at the Marriott Village at Little Lake Bryan, a 1,100-room hotel complex near Walt Disney World in Orlando, Fla. Scheduled to open Oct. 10, the gated village features a 312-room Courtyard by Marriott, a 388-room Fairfield Inn and a 400-suite Spring Hill Suites.

Owned by CNL Group of Orlando, amenities at the $150 million resort will include a food court, interactive water pools, a video shop, business areas, a Hertz car rental, three fitness centers, a Kid's Club and 5,000 sq. ft. of meeting space.

Ed Roski bets $365 million on Las Vegas Hilton Los Angeles real estate mogul Ed Roski Jr. has reached an agreement to purchase the Las Vegas Hilton for $365 million from Las Vegas-based Park Place Entertainment. The transaction is expected to be completed by the end of the year.

The new owner has big plans for the hotel, including construction of up to 1,500 new hotel rooms and entertainment facilities on the hotel's undeveloped 30 acres. According to Roski, other plans include: renovating the casino and public spaces; remodeling more than 1,000 of the 3,000 hotel rooms; and increasing the variety and quality of dining, entertainment and retail offerings. The hotel is expected to remain open during upcoming renovations.

Roski, who is president and CEO of Los Angeles-based Majestic Realty Co., owns, manages and leases more than 3 million sq. ft. of property in south Nevada. Park Place, which has an interest in 28 gaming properties worldwide, plans to consolidate its high-end gaming operations in Las Vegas at Caesar's Palace.

Hotlanta's scorching economy fuels two hotel projects As proof of Atlanta's healthy economy, two big hotel projects are scheduled in different parts of the city. In addition to Turner Broadcasting System's plans to expand the downtown Omni Hotel (for details, see pg. 34 of the Office Beat), Atlanta-based Bass Hotels & Resorts is planning a 425-room Inter-Continental Hotel as part of a $175 million project in Buckhead that includes an attached 20-story office tower.

Located at Peachtree Road and Highland Drive, the Inter-Continental will bring another high-end hotel to Buckhead, which also is home to the Ritz-Carlton Buckhead, Swissotel Atlanta, the Grand Hyatt and the J.W. Marriott Hotel. A zoning request has been filed for the project, but a construction schedule has yet to be determined, says Jennifer Ploszaj, brand manager/public relations for Bass Hotels. Hogan Group of Tampa, Fla., will own the hotel and office towers.

Marshall, Encore to search far and wide for properties Gulfport, Miss.-based Encore Enterprises Inc. and Salisbury, Md.-based Marshall Management Inc. have formed a joint venture to acquire and develop $175 million worth of hotels in the next three to five years. Encore Enterprises, a hotel development and ownership group, will be responsible for negotiating acquisitions, and Marshall Management will oversee the day-to-day operations of the hotels.

Marshall Management and Encore Enterprises plan to open 12 or more hotels. The partners, as well as private and institutional investment sources, will provide funding for the venture, which will employ a multi-brand strategy.

Dylan to open in New York following $30 million facelift After $30 million in renovations to a 1903 Beaux-Arts building, the Dylan Hotel is preparing for a late August opening. Located at 52 E. 41st St. between Madison and Park avenues, the hotel occupies the former Chemists' Club building.

Owned by New York developer Morris Moinian and operated by Chicago-based Allied Hospitality Group, the hotel's amenities will include high-speed Internet access, 27-inch televisions with Internet access and in-room entertainment systems featuring a digital library of games. Forest City expanding hotel on Steel City's waterfront

Construction has begun on a nine-story, 104-room expansion at the Sheraton Station Square Hotel in Pittsburgh. Part of a $25 million project that includes renovations to the existing hotel, the addition is scheduled to be completed in September 2001. The hotel, which is owned by Cleveland-based Forest City Enterprises Inc. and managed by White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc., will remain open during the project.

Located at 7 Station Square Drive on the Monongahela River across from downtown Pittsburgh, the expansion will the bring the number of guestrooms at the hotel to 396. A $5 million makeover of guest rooms, suites and corridors was completed in April. Other renovations will include improvements to the hotel's meeting rooms, bar, health club and pool.

, lobby, restaurant and entrance. The hotel addition and renovation is part of a mixed-use development at Station Square that will include retail and restaurants.

Following three will go in a box:

WestCoast flag replaces Cavanaughs

Atlanta-based The Ritz-Carlton Co. has opened a 331-room hotel in Philadelphia. The $88 million hotel marks the third Ritz-Carlton in Philadelphia. Featuring two ground-floor restaurants, a bar off the lobby and an underground ballroom, the downtown hotel is adjacent to Two Mellon Center.

The re-branding of Spokane, Wash.-based Cavanaughs Hotels is complete with the placement of the WestCoast flag at properties in nine western states. Cavanaughs Hotels acquired WestCoast Hotels Inc. in January and renamed the corporation WestCoast Hospitality Corp.

Atlanta-based Lend Lease Real Estate Investment Group will spend $46 million to purchase the 521-room Hyatt Regency Tampa from Hartford, Conn.-based Cornerstone Real Estate Advisors. Chicago-based Hyatt Corp. will continue to manage the hotel, which opened in 1982.

The 1980s were not good for the hotel industry. Loose lending standards and a boom in development resulted in the crash of the late-1980s. Mortgage defaults skyrocketed, and lenders turned away from the hotel industry in favor of more stable property types.

Those bad days are over, according to the Lodging Industry Mortgage Report. Written by international consulting firm PricewaterhouseCoopers and conceived by New York-based Citadel Realty Group, the report indicates that the industry has rebounded. After peaking at 16% in 1996, defaults have dropped to less than 2%, and investment in the hotel industry is no more risky than other property types, according to the report.

"The industry is now owned by much stronger parties than it was in the 1980s," says Joel Ross, principal at Citadel Realty. "In the 1980s, you had a lot of tax shelter syndicators and office developers, and people who should never have owned or built hotels."

Tighter underwriting standards weeded out bad owners and created a stronger hotel market. "The tight underwriting that was instituted in 1993 should be continued," says Ross. "If that tight underwriting continues, the industry will remain healthy; new construction will continue to tail off; and we will have a continuation of successful financial results for the industry."

Given the healthier state of the hotel industry, Ross hopes lenders will reduce interest rates on hotel loans, which currently average about 50 basis points higher than other real estate property types. "The extra premium should go away, because it's not justified," he adds.

Sponsored by the New York-based American Hotel & Motel Association, other findings of the report include:

* Hotel mortgage default rates are at historically low levels. After peaking at 16% in 1992, defaults dropped to 8% in 1994. Since then, default rates have remained below 2%.

* Investor confidence is on the rise in the hotel sector. This is largely due to strong income growth, tight lending standards and the elimination of favorable tax programs that led to the "irresponsible" lending and construction in the 1980s. It is unlikely that default rates will reach early 1990 levels because conduit lenders must deliver offerings that are attractive to the secondary market, which can choose from a variety of financial products.

* The lodging industry is conservatively leveraged. Despite the increase in profitability in the industry, there has not been an increase in financial leverage.

* Lender underwriting criteria has remained stringent, and loan-to-value ratios are at about 65%. In this environment, the short-term outlook is for stabilization of interest coverage or a slight improvement.

* Lending standards are expected to remain conservative through 2001. The secondary markets remain cautious toward the hotel market, which means lenders can't loan to marginal borrowers.

* The mortgage default rate may rise to slightly more than 2% in 2001 because some of the older and weaker hotel properties that have been swept along by the strong market will slowly fall by the wayside.

* Despite the credit crunch, hotel fundamentals remain strong. Occupancy and revenue growth are expected to moderate over the next two years as new supply moves the market toward equilibrium.

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