Roughly seven months after buying the 301-room Four Points by Sheraton Orlando Studio City on North International Drive for $15 million, Indianapolis-based Hotel Capital has turned the property in a multi-million dollar profit, selling for $23 million on Wednesday to Tampa-area hotel investor Ben Mallah.
"The property wasn't being marketed for sale, but a buyer came out of nowhere and made us an offer we couldn't refuse," Michael Collier, principal and CEO of Hotel Capital, told GrowthSpotter on Friday.
"We're going to look to reinvest this in Orlando," he continued. "The (sale proceeds) aren't eligible for a 1031 exchange fulfillment, but we like the Orlando market."
The buyer, International Drive Hotel LLC, is an affiliate of Largo-basedEquity Management Partners, whose principal is Mallah, an owner of hotels and apartment properties throughout Florida.
Mallah told GrowthSpotter on Friday he bought the I-Drive hotel to fulfill part of a 1031 exchange opportunity, after selling major portions of his Tampa portfolio, including the Best Western Bay Harbor.
"We were under the gun to place $45 million in 45 days, this was just a piece of it," Mallah said. "I still have another $17 million to close. I've got a few irons in the fire."
Located at 5905 International Drive, just west of the intersection with South Kirkman Road, the company acquired two lots totaling 5.38 acres. One now serves as surface parking, while the other is occupied by the hotel, which was built in 1974 and has 19 floors with more than 152,000 gross square feet.
Mallah said he has budgeted between $4-5 million for an extensive renovation to the hotel, and will coordinate with Starwood and its successor, Marriott International. The renovation will take up to 18 months and will include upgrades to the rooms and bathrooms, parking lot improvements and new landscaping.
One of the goals will be to preserve the building's unique features. "The building has so much character – that's what I love about it," he said. "It's an iconic building. It stands so tall. We want to put it back in original or better condition."
The seller, Hotel Capital, didn't reap an $8 million-profit, as the previous acquisition and new sale figure suggests, due to additional costs for the purchase back in June and renovation investment that followed. "But we reaped a very nice return," Collier said.
Collier said the 0.83-acre second parcel currently used as surface parking is eligible for development, but he's not sure what the new owner plans for it.
Collier had told GrowthSpotter back in June the hotel would go through a brand-required "multi-million" dollar renovation that is phased over the next three years. He declined to confirm how much of that renovation was carried out since June.
Hotel Capital still owns a Marriott Springhill Suites in Orlando and an assisted living facility in Gentry Park, and is actively looking for more assets to acquire here in hospitality and other real estate classes, Collier said.
Mallah's buyer LLC acquired a $12.18 million loan from Bank of America to help finance the acquisition. The buyer was represented by Clearwater attorney Thomas C. Nash, president of MacFarlane Ferguson & McMullen.