Posted May 11, 2012, 5:07 PM
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Join Date: Jun 2009
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Hopefully something will come of this.
Evergreen in due diligence to purchase Phoenix's Hotel Monroe
From Business Journal Print Edition
The latest potential buyer of the skeletal Hotel Monroe building is looking at whether its financing and redevelopment plans can overcome years of damage to the downtown Phoenix structure from exposure to the elements.
Evergreen and its development partners — including Westroc Hotels and Resorts CEO Scott Lyon — are in the due diligence phase of the acquisition. The purchase hinges on whether rehabilitating the long-vacant building is logistically and financially viable.
Several suitors have come and gone for the historic 13-story, 157,000-square-foot tower, formerly called the Professional Building, according to Jason Harris, deputy director of the Phoenix Community and Economic Development Department.
“This is the fifth or sixth group,” he said.
The property took on the Hotel Monroe name based on plans by Grace Communities, the now-defunct Scottsdale developer that bought it in 2007 and began a redevelopment effort via a $27 million loan from Phoenix commercial lender Mortgages Ltd. Mortgages Ltd.
The building has been vacant since then, its upper floors windowless, exposed to the weather and inhabited by birds.
Mortgages Ltd. later was forced into Chapter 11 bankruptcy reorganization when the real estate market tanked and CEO Scott Coles committed suicide.
Evergreen, which traditionally has focused on retail stores, is considering buying the structure for $7 million as part of Chapter 11 dispositions of properties owned by Mortgages Ltd.
Mark Winkleman, chief operating officer of ML Manager, the receivership disposing of Mortgages Ltd.’s assets, said Evergreen has about a month left in its due diligence phase. He confirmed there have been several previous suitors — including a potential deal last year that didn’t make it through due diligence.
Winkleman and Harris both said Westroc and Lyon are potential partners for Evergreen.
“He’s involved,” Winkleman said of Lyon.
Westroc owns the Hotel Valley Ho in Scottsdale and the Sanctuary on Camelback Mountain in Paradise Valley.
Some of the Hotel Monroe’s previously boarded-up lower windows are open now, giving a clear view into the empty shell of the structure that was built in 1931 as a bank and still has a vault in the basement.
Winkleman said the building essentially has been vacant for 15 years, though it housed a McDonald’s restaurant and a bar in the early 2000s.
Evergreen and Westroc both declined to comment on the project.
Harris said while several other potential buyers have come and gone, and the prolonged exposure to the elements is problematic, the building is structurally solid.
“It technically has sound bones,” he said.
Harris said Evergreen and its development partners need to figure out whether they can acquire the necessary financing, given the anticipated cost of building a hotel and dealing with remediation and repair issues.
City zoning already has slated the Hotel Monroe building for boutique hotel use.
Ben Patton, a senior planning adviser for law firm Ridenour Hienton & Lewis PLLC in Phoenix, said a hotel likely is the best path for a new owner, but he also mentioned some residential possibilities.
Patton said the property does not have its own parking space, which creates challenges.
“The structure does not include adjacent parking, and hotel users who do not use the light rail system will still need to be accounted for,” Patton said.
The Hotel San Carlos, across from the Hotel Monroe, offers valet parking for $20 per day. Its guests also may park for $15 a day in the garage adjacent to Chase Tower.
Harris said current plans for the hotel at the Monroe site include a nightly rate of about $150.
The redevelopment could qualify for historic preservation tax credits and city property tax breaks. Those breaks, called government property lease excise taxes, or GPLETs, allow the city to own the property and lease the land temporarily to private owners and developers. It also allows for lower tax rates than privately held land.
GPLETs have been used extensively in downtown Phoenix and Tempe, as well as for some big resort and retail development in other Valley cities.
Harris said there is a slim chance a new user could look to demolish the building and start from scratch, but that likely would face downtown community opposition.
“With so many of our historic gems in the city’s core now gone or obsolete, it is critical that those remaining significant structures become contributors to our core,” Patton said.
Downtown Phoenix boosters want to see the building secure a place in the city’s future.
“This is a critical project for downtown due to its visibility, central location and historical significance,” said Dave Roderique, CEO of the Downtown Phoenix Partnership. “I’d like to see a boutique hotel or exclusive office use as long as the building is preserved.”
Mike Sunnucks writes about politics, law, airlines, sports business and the economy.
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