Here’s How the $602M Desert Ridge Deal Got Closed

Article originally posted on AZ Big Media on December 2, 2019

It was a deal that grabbed everyone’s attention, but not one that shocked the market experts that saw how strong the Phoenix hospitality sector really was.

In September, the JW Marriott Desert Ridge Resort & Spa was sold for $602 million to a joint venture between Trinity Real Estate Investments LLC and Elliott Management Corporation. This large-scale investment duo snatched up the property in the biggest resort sale in Arizona history.

“When you see a big transaction like that, you take note,” said Jennifer Bergamo, vice president with the CBRE Hotel Group, which is based in Phoenix. “A few years ago, the Phoenician traded and the Hyatt Gainey and Royal Palms and the Biltmore, so there has been significant traction and these were all trades after the downturn.

“It’s definitely an exciting time for the Valley in real estate, but particularly for hospitality.”

While the brokerage firm that worked on the deal will not be released due to confidentiality clauses, Bergamo noted that she and CBRE had just completed a pair of sales for full-service, branded hotel properties in Q3. She said that the market fundamentals are very strong, making these properties very attractive to the kinds of investors she is seeing.

“The Valley was the last market to recover during the downturn, so there’s just a lack of new supply and we have a quality labor pool that’s highly educational and we have strong performing fundamentals in the existing hospitality assets,” Bergamo said. “(On the deals I recently closed), it was a who’s who list of hotel investors, institutional players, private equity and REIT’s coming through the Valley to take a look at these assets. I think we had more than 30 tours at each property, which really is an indication of the desirable market that we have.”

Spanning 396 lush acres in North Phoenix, the JW Marriott Desert Ridge Resort & Spa features a 950-room hotel, 212,500 square feet of flexible meeting space, seven food and beverage options, and numerous amenities including five pools, a lazy river, a world-class spa, and two championship golf courses designed by Arnold Palmer and Nick Faldo. The luxury complex, which also boasts the largest ballroom in the state, is considered one of Arizona’s premier resorts and was ranked by U.S. News & World Report as one of the best hotels in Phoenix for 2018.

“We are pleased to continue our strategic partnership with Elliott through the acquisition of another world-class resort destination,” said Sean Hehir, managing partner of Trinity. “Importantly, we managed to purchase this trophy asset at an attractive basis well below replacement cost, reflecting our ability to source and close deals that align with our strict investment parameters. We look forward to applying our proven value-add platform to drive enhanced operational and financial performance.”

Situated in one of the nation’s fastest-growing cities, the Resort is well-positioned to benefit from demand drivers for business and leisure travel due to Phoenix and Scottsdale’s strong economic growth and rising competitiveness in the group and convention market. Due to its geographic proximity and access to markets throughout California and the Southwest, Phoenix serves as the primary commercial and cultural hub of the Southwest United States and is a preferred business destination.

Tim Mackey, portfolio manager at Elliott responsible for commercial real estate in the Americas, added, “Elliott is pleased to close another major transaction with Trinity, a globally recognized hospitality investor and actively engaged asset manager. Desert Ridge is a strategic complement to the Grande Lakes Resort in Orlando, Florida, which we acquired with Trinity in December 2018. Large luxury group-business resort and conference center properties continue to be attractive investment opportunities. The JW Marriott Phoenix Desert Ridge Resort & Spa is a market leader in terms of number of rooms, meeting room space, location, and quality.”

In 2018, hospitality transaction activity increased in the market, with portfolio sales representing a significant portion of the increase. The sale of the Waldorf Astoria Arizona Biltmore for $400,000,000 represented the top single-asset and overall highest transaction last year. Non-portfolio sales volume kept pace through the first quarter of 2019, with the sale of the boutique Clarendon Hotel in Central Phoenix representing the largest price-per-key transaction at just under $184,000 per room. 

Bergamo said that 2019 is looking like it will be even stronger than 2018, with RevPar (revenue per available room) expected to increase four percent. And for 2020, the numbers look strong as well, with the Phoenix market on pace for an increase in occupancy rates and average daily rates.

“To put that in perspective, the national projection for RevPAR growth is .9 percent,” said Bergamo. “That tells an investor that there is an opportunity for growth and, we’re priced in a way that is more palatable than major East Coast markets or coastal markets. Barring a major catastrophe, I think we’re well poised for a solid year ahead.”

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