$89.5m deal with Maryland firm will help pay down debt
Boston’s luxury W Hotel was sold yesterday, less than a year after its developer filed for bankruptcy protection because of slow sales of condominiums in the Theatre District complex.
Pebblebrook Hotel Trust, a Maryland-based investment firm, is buying the hotel from developer Sawyer Enterprises for $89.5 million. The transaction, disclosed in US Bankruptcy Court documents yesterday, did not include the 123 condominiums on the property, which will still be under Sawyer’s control.
The hotel will continue to be operated by an affiliate of Starwood Hotels and Resorts Worldwide Inc., under the W brand.
The sale will help Sawyer repay debt related to development of the hotel and condominiums, which are contained in a 26-story tower at the corner of Stuart and Tremont streets that cost about $234 million to build. Prudential Insurance Co., which provided a $192 million loan for the complex’s construction, tried to foreclose on the property last month but was rebuffed by a US Bankruptcy judge, who granted Sawyer more time to reorganize its finances.
Pebblebrook, a real estate investment trust, was organized in 2009 to acquire upscale hotel properties following a recession that hit the hotel industry especially hard. Its other acquisitions include the Hotel Monaco in Washington, D.C., the Sir Francis Drake Hotel in San Francisco, and the InterContinental Buckhead Hotel in Atlanta, among others.
The company did not return a phone call seeking comment yesterday.
The W is a striking building with a sheer glass face, accented by fluorescent backlighting.
It has 235 hotel rooms on its first 15 floors and 123 luxury residences on the top 13. Rooms can cost more than $300 a night.
Real estate specialists said the hotel’s sale price was comparable to recent deals and that the W Boston’s value did not seem affected by the developer’s bankruptcy proceedings. The price “is right smack in the range that you see for full service hotels that transacted in the last 12 to 24 months,’’ said Victor Calanog, an executive with Reis Inc., a New York research firm.
Sawyer, which built the hotel under a subsidiary, SW Boston Hotel Venture LLC, ran into financial trouble even before construction of the complex finished in the fall of 2009. The developer struggled to pay for furnishings and high-end finishes guests expect from the W brand, which emphasizes luxury amenities. Eventually the City of Boston stepped in with a $10.5 million loan that allowed Sawyer to finish a spa, restaurant, and theme bar on the property.
Sawyer Enterprises is run by Carol Sawyer Parks, daughter of taxi magnate Frank Sawyer, former owner of Checker Taxi Co. of Boston. In a statement yesterday, she said the company’s financial position is improving and that it intends to file a bankruptcy reorganization plan later this week.
“With the steady sales of the residences and the funds provided by the sale of the hotel, our timetable to pay off our indebtedness will be accelerated,’’ Parks said in the statement. She added that 43 of the condominiums in the complex have either sold or are under agreement; only 12 had been sold when the company filed for bankruptcy last April.
During recent bankruptcy proceedings, real estate specialists estimated Sawyer would be able to sell the remaining condominiums within three years.
The company had been trying to develop a hotel complex on the Stuart Street property since the 1990s, but the project had several false starts before finally moving forward in 2008.
The cash-flow problems worsened after the W’s opening, with Sawyer selling only a handful of condominiums as the recession ate into the demand for expensive housing and hotel rooms. Typically, developers rely on the quick sale of condominium units to help support the early operations of a large luxury hotel.
As of February, Sawyer still owed $154 million to Prudential and $6 million to Boston, according to the findings of Judge Joan N. Feeney, who is presiding over the case in US Bankruptcy Court.
Casey Ross Boston Globe March 29, 2011