Jack Pearadin and Doug Nelsen found a 1.73-carat diamond after nearly a year of searching the park's field.
My sources indicate there's an offer and acceptance, but further due diligence is required. I now have received, under the FOI, notes kept on a meeting yesterday between the prospective buyer and the Arkansas Teacher Retirement System, which currently holds the $24 million note on the hotel issued for the Peabody Hotel Group.
These notes identify the Fairwood Hotel Group of Memphis as the potential buyer and reflects, as I'd learned earlier, that the buyer plans some $12 to $15 million in improvements. A Marriott was being mentioned as the potential operator.
As I reported earlier, a business card released by ATRS under the FOI shows the group is led by Robert Salmson of Memphis.
What I'd written earlier:
An announcement is expected within the week, perhaps today, but it will be only that negotiations are underway and a series of approvals are necessary, including from the City Board and Little Rock Advertising and Promotion Commmission.
Fox 16 advanced the story Wednesday with news of a meeting in Little Rock today between Marty Belz of Memphis, president of the Peabody Hotel Group, and city officials. David Goins spoke with Belz, but neither he nor city officials would comment on the sale reports.
Under the scenario most discussed, another investment group will buy the property and assume the Peabody group's lease. Marriott has been mentioned often as the national chain to be engaged to operate the hotel, but it is only one of several potential brands being discussed, I learned Thursday morning. I also continue to hear that Davidson Hotels and Resorts of Memphis, a hotel operations manager, might have a role in the coming change.
UPDATE: Three sources report progress toward a deal on the Peabody, though none was ready to say final agreement had been reached. A Memphis-based hotel group is the potential buyer. Sources point to the Fairwood Capital Group, headed by Robert Solmson, which owns the Hampton Inn and Suites on Beale Street. Branding of the property won't be decided for several months. A significant renovation investment is expected, in range of up to $15 million, though one party close to the negotiations said that figure is high. Some of that cost will be pegged to standards of the national hotel chain name under which the hotel will operate, explaining current uncertainty about branding.
The Arkansas Teacher Retirement System is the lender for the Peabody investment. That amount would be due on a sale, unless a loan assumption was negotiated. No application has been submitted yet, I'm told by George Hopkins, director of the system. At the current 7.5 percent rate in today's cheaper credit market, the buyer isn't likely to be interested in a straight assumption.
UPDATE II: All my particulars confirmed now in a news release on the jump saying a deal is in progress.
UPDATE III: Following the release is a memo City Attorney Tom Carpenter prepared to summarize talks with the city yesterday about the proposal. It notes that the current owners felt association with a national brand was needed for marketing and that there was a need for an infusion of capital that current owners weren't prepared to make. It confirms my earlier reports that Davidson Hotels would be manager of the property for the investment group (it currently manages a Hyatt in Knoxville, among others). The memo mentions a need to increase occupancy from the current 51 percent.
NEWS RELEASE FROM DENVER PEACOCK OF CJRW
MEMPHIS, Tenn. (June 28, 2012) – BG Excelsior Limited Partnership, an affiliate of Peabody Hotel Group, has signed an agreement with an affiliate of Fairwood Capital, LLC, a real estate investment firm focused on hospitality assets, regarding a potential sale of The Peabody Little Rock. The sale is subject to completion of the buyer's due diligence and various other conditions including approval of the transaction by City of Little Rock officials.
"The Peabody has been honored to be part of the Little Rock community for these past 10 years," said Andrew Groveman, senior vice president of Belz Enterprises, the Memphis-based family-held business that is affiliated with Peabody Hotel Group. "We are delighted to have found a prospective buyer we have known for many years and who plans to invest substantial funds into the hotel, so that it will continue to be a vital part of the Little Rock lodging and tourism scene."
The buyer is exploring several upscale national hotel franchise companies to determine a brand for the hotel. The rebranding of the hotel will require a multi-million dollar investment in comprehensive renovations to the property. Property renovations will likely include all guest rooms and some public spaces, and they are not contingent upon financing. The buyer expects to select a brand for the hotel within the next month.
About The Peabody Hotel Group
Based in Memphis, the Peabody Hotel Group is affiliated with Belz Enterprises, a highly successful real estate development and management firm. The Peabody Hotel Group is one of the nation's leading hotel management companies, operating Peabody-flagged hotels in Memphis, Tenn., Orlando, Fla. and Little Rock, Ark.
About Fairwood Capital, LLC
Fairwood Capital, LLC is a real estate investment firm focused on the acquisition of hospitality-related real estate assets. The company pursues a value-oriented investment strategy and seeks to acquire premium-branded, select service, extended-stay and full-service hotels in the United States.
MEMO FROM TOM CARPENTER
Assignment of Little Rock Peabody Construct & Lease Agreement
27 June 2012 at 11:00 am
Re: Potential assignment of lease between the City and BG Excelsior Ltd Partnership to
Fairwood Capital, LLC
ATTENDEES: MS/BTM/TMC/WCM/Robert Solmson(BS)/Ron Belz(RB)/ Denver Peacock(DP)
The City has a lease agreement with BG Excelsior Ltd Partnership for the operation of the Peabody Hotel on City property; on 27 June 2012 a meeting was held the next day with Fairwood Capital, LLC and Ron Belz to discuss a potential assignment of the lease agreement.
1. RB said that the Peabody needed to be associated with a national brand (franchise) that had marketing tools available to it; also, there was a need for a tremendous infusion of new capital for the structure; Belz Enterprises, despite a previous good association with Little Rock, did not want to make that kind of infusion in light of the return on investment;
2. BS noted that he created a real estate trust (RET) that was the first to go public in 1993, and that it was sold in 2003; Fairwood Capital is a newer entity that currently owns nine properties; the basic plan is to purchase hotels for cash and perhaps incur debt later, and that currently three of the nine properties are encumbered;
— Little Rock is a high profile asset that could benefit from a national/international connection for marketing purposes; three different franchises (permitted by the Construct and Lease Agreement) are currently in negotiations
— Fairwood expects that there will be no encumbrance except for the lease;
— There had been a meeting with the state teacher’s retirement system;
— The desire is to operate a full service convention hotel;
— $12 -16 million is the anticipated cost of renovation
— A purchase offer signed on 25 June 2012 and due diligence period is in operation
— In response to question from MS, the idea is to be a long term investment, but Fairwood would sell a hotel if a proper offer were given
3. MS said that a long term investment was important to the City; he also noted with approval the national registration advantage and said that the City wanted a four diamond, or four star convention hotel
4. BS said that management of the hotel would be done by Davidson Hotel which currently manages a Hyatt in Knoxville, Tennessee for Fairwood; BS and MS agreed that there would be a meeting with Davidson when they come into town next week to meet with the Peabody staff;
— BS noted that Belz Enterprises managed the Hampton Inn in Memphis, Tennessee
5. BS noted a goal to increase occupancy from 51% to 61% and that Davidson would have some ideas on how to help this increase; it was believe that 15,000 additional room nights would be required; the ADR on the transient rate would be increased; according to Smith Travel, the index is approximately in the 90-100 level and may need to be higher in this particular market;
— of course, the transient or leisure travel rate would be supported by discounted convention rates for the hotel
6. BS said that the hotel would remain open during renovation; most of the renovation would be in the rooms although some would be in the common areas
7. BS hoped that there would be an agreement with the flag within the next two weeks and that the announcement could be made then as to the flag; Davidson would take over the management of the hotel as soon as the sale is finalized
8. (BTM asked TMC what Board action was required, if any; if it is an assignment to an approved hotel, BOD action may not be required; THIS NEEDS TO BE VERIFIED).
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