Deal to sell city owned Sheraton Hotel may be fizzling

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The city-owned hotel opened in 2008 with a purchase price of $335 million. (Source: 3tV/CBS 5) The city-owned hotel opened in 2008 with a purchase price of $335 million. (Source: 3tV/CBS 5)
PHOENIX (3TV/CBS 5) -

More than a year after Phoenix city councilors voted to sell the city-owned Sheraton Hotel in downtown, the city still owns the property, leading some to believe the sale has fizzled out.

"This deal is not going to move forward with those terms; it's just not going to do that," Councilman Sal DiCiccio said

In February 2016, the City Council agreed to take a $50 million loss and sell the hotel to Thayer Lodging Group? (TLG) Phoenix for $300 million.

[READ MORE: Phoenix offered $300 million for downtown Sheraton (Feb. 2, 2016)]

The city paid $350 million to build the 1,000-room hotel on Third Street.  At that time, it was to help support the convention center and downtown.

"Taxpayers have lost over $145 million dollars on this boondoggle of a hotel while they could have had funding for police, fire and these roads that are crumbling out there," DiCiccio said.

The city councilor says since the Sheraton opened in 2008, they've suffered about a $45 million operational loss. Add that to the $50 million they were prepared to absorb in order to sell the hotel last year and another $50 million loss due to the property's decrease in value.

"There's a reason no one else has lined up for this hotel; there's a reason for that," DiCiccio said. "It's not worth the value."

He says the hotel is only worth about $250 million now, and that maybe what's holding up the TLG Phoenix deal.

"Staff will tell you that they're working it and politicians will always try to soft sell it," he said adding later that, "the city of Phoenix politicians made a terrible decision to get into the hotel business."

In an emailed statement regarding the sale, Mayor Greg Stanton said in part the city stands ready to make a deal when "we find the right private-sector partner that can meet our needs and theirs."

[READ: City of Phoenix taking offers for Sheraton Grand Hotel (Feb. 1, 2016)]

The statement continued on to say, "I’m confident that will happen because the Sheraton is currently paying its operating costs, it’s paying its debt and it is making a profit. This is an appropriate time to move, and when the timing is right the private sector will act and we will make a deal.”

DiCiccio, though, doesn't buy it. He says if this sale falls through, there is no "plan B," leaving the city with a difficult and likely financially draining decision to make.

"The question is do you want to take a $100 million loss [to sell it] or do you want to continue bleeding over time," he said.

At this point, it's unclear what the City Council will do if it can't get this deal done.

Copyright 2017 KPHO/KTVK (KPHO Broadcasting Corporation). All rights reserved.


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