Wednesday, March 26, 2008

Sale of Sheraton

Let’s hope the deal, with its give back feature, results in a good give back to the efforts to develop downtown.

Sacramento City Council OKs sale of Sheraton-Grand
By Mary Lynne Vellinga -
Published 12:00 am PDT Wednesday, March 26, 2008

The Sacramento City Council approved the $130 million sale Tuesday of its Sheraton Grand Hotel and garage on J Street – along with an unusual agreement to return about $23 million of the city's profits to the buyers as subsidies for additional downtown projects.

Council members voted 8-1 in favor of the sale despite a public admonition by interim city Treasurer Tom Berke that more review is needed, particularly given the depressed state of the real estate market. He suggested the city might hold on to the hotel longer and wait for prices to rise.

"By all means, if the price is fair and if the timing it right, let's do the sale," Berke said. "But why are we rushing into this?"

Councilman Kevin McCarty, who called Berke the city's "top fiscal watchdog," cast the only no vote.

"Our treasurer said he'd like to have more time to evaluate it; I don't think that's an unreasonable request," McCarty said.

Other council members called the price fair, and expressed fear that market conditions would deteriorate further and the deal would evaporate. And other high-level city staff advocated the sale, which is expected to close by April 15.

Councilman Steve Cohn, addressing Berke, said, "If you're correct about how severe this recession is, now is exactly the time to sell. None of us has a crystal ball, but what we've been presented with has great benefits for the city. Frankly, I want to get out of the hotel business and invest in other things."

After the vote, Mayor Heather Fargo said, "I think we made a good decision, and a big decision."

A team of two developers, David Taylor and the CIM Group, plan to pay $130 million to buy the hotel and the city-owned garage used for guest parking.

After money is set aside to pay off the hotel's construction bonds, the city expects to receive proceeds of between $40 million and $45 million.

On Tuesday, the City Council agreed to the developers' request that half of the city's profits be set aside to help underwrite future, as-yet-unspecified downtown projects by Taylor and CIM.