The Renaissance hotel in Colorado Springs is back on the market after local real estate company Classic Cos. walked away from its purchase of the property.
Classic, which had contracted months ago to buy the partially finished 300-room hotel and conference center, ended its pursuit of the property in the last two to three weeks after deciding the deal wouldn't work financially, CEO Doug Stimple said this week.
"It didn't come together," Stimple said. "Based on our analysis, the economics weren't there to support the proposed investment. That's the bottom line.
"The risk-return wasn't there," he added. "Too much risk, not enough return."
The late Missouri hotelier John Q. Hammons began construction on the 10-story hotel on the Springs' far north side in 2007. The 20-acre site, east of Interstate 25 and InterQuest Parkway, was donated by Classic and Springs-based Nor'wood Development Group.
Hammons spent $47 million, but never got additional financing, and work stopped in October 2009 after the hotel was roughly half finished. Hammons' general contractor, Flintco Inc. of Tulsa, Okla., took over the partially boarded up hotel after bidding $28.8 million at an October 2011 foreclosure sale. Flintco has been trying to sell it ever since.
Classic is one of the Springs' largest home builders and has developed high-profile neighborhoods such as University Park, High Forest Ranch and Flying Horse, where the company proposed earlier this year to build a 40-room boutique hotel.
In considering the purchase of the Renaissance, Classic hired consultants from around the country to research the hotel's potential, Stimple said. Classic also had a financial commitment from a large equity group in the Raleigh-Durham, N.C., area, whom Stimple declined to identify.
The deal would have cost $70 million to $80 million, and included the purchase and completion of the hotel, operating capital and acquisition of supplies, equipment, furniture and fixtures, Stimple said. It would have required the assumption of debt and a $30 million equity contribution, he said.
For Classic and its partner to get an acceptable return on their investment, the hotel would have needed an occupancy rate of 62 percent to 64 percent and nightly room rates averaging $165 to $170, he said.
Those numbers are achievable, Stimple said. And yet, if they fell to, say, 58 percent occupancy and rates averaging $150 a night, the return on investment could go "upside down quick," Stimple said.
"And we don't need a whole lot of things to go upside down."
It's possible another buyer will make the numbers work, but the deal didn't pan out for Classic, Stimple said.
"We gave it six months," he said. "We spent a lot of money. Did a lot of study. And ultimately, somebody that's more adept at it and smarter than us comes in and figures it out. But we didn't get there."
Hotel owner Flintco, meanwhile, remains optimistic it will find a buyer, company board chairman Tom Maxwell said Thursday.
The hotel is being marketed by national real estate firm Holliday Fenoglio Fowler, whose website says the property could be completed 10 to 12 months after construction resumes. It includes nearly 47,000 square feet of meeting space, a restaurant, fitness center and several other amenities.
"We are seeing more interest now," Maxwell said. "The hotel market has improved nationally and so there's more money available today.
"It's still ready to go," he said. "It won't take that much to get it completed. So we're looking forward to that.'
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