The Hotel Minneapolis joins Marriott International Inc.’s Autograph Collection

A fast-growing hospitality-investment company has agreed to acquire a majority interest in The Hotel Minneapolis and will rebrand it under Marriott’s newest hotel flag.

The terms of Norwalk, Conn.-based HEI Hotels & Resorts’ acquisition were not known. The developer, Hempel Properties, and its hospitality partner, Morrissey Hospitality Cos. Inc., will retain minority interests in the 222-room hotel, located at 215 S. Fourth St. in downtown Minneapolis.

Following the deal, The Hotel Minneapolis will convert from Hilton Hotels’ Doubletree brand to Marriott International Inc.’s Autograph Collection, a recently launched line of independent, upscale hotels. HEI will take over management of the property from Morrissey, a St. Paul company that also operates The Saint Paul Hotel.

“The hotel’s doing pretty well, so I’m glad it’s being recapitalized,” said Bill Morrissey, president of Morrissey Hospitality. “Customers have nothing to worry about. It’s a new, strong ownership group, so I think it’s a very good day for the hotel.”

Morrissey referred additional questions to Minneapolis-based Hempel Properties, which declined to comment for this story. HEI officials also declined to comment.

The Hotel Minneapolis, which opened in August 2008, includes a full-service restaurant called Restaurant Max, a lounge and approximately 5,000 square feet of meeting space. Built in 1905, the 10-story building — formerly known as the Midland Bank building — served as a bank and office property until Hempel Properties bought it for $11.2 million in 2006.

Hempel Properties also wants to sell the Soo Line Building, a 19-story tower in downtown Minneapolis that it bought for $23 million in September 2007. The company recently hired NorthMarq Real Estate Services in Bloomington to list the property, which it previously planned to convert into a hotel.

The hotel industry was battered by the Great Recession. According to a report from Atlanta-based PKF Hospitality Research, the average U.S. hotel suffered a 35 percent decline in profits in 2009, the largest one-year drop since PKF started tracking the industry in the 1930s.

Locally, occupancy rates declined 0.9 percent to 55.9 percent in 2009, while average daily rates fell 10.5 percent to $91.56 and revenue per available room (RevPAR) plunged 18.9 percent to $51.22, according to Hendersonville, Tenn.-based Smith Travel Research Inc. So far this year, occupancy has rebounded somewhat, but rates have continued to slide.

Aggressive growth

In addition to Hotel Minneapolis, HEI owns 34 other hotel properties in 16 states, primarily in the South and Northeast. Its only other Minnesota hotel is The Westin Minneapolis, a 214-room property located at 88 S. Sixth St. in downtown Minneapolis.

HEI is one of the nation’s most aggressive hotel investors. According to its website, the company is “positioned and on track to acquire and/or develop approximately $500 million annually in hotel real estate.” It targets full-service hotels with between 200 and 600 rooms.

HEI launched its $515 million HEI Hospitality Fund III in early 2008. It’s the company’s third such fund, following a $275 million fund deployed in 2004-05 and a $475 million fund deployed in 2006-07.

Last month, HEI acquired a 202-room Le Méridien hotel in Philadelphia. The company also used its latest fund to buy a 353-room Marriott in Hanover, N.J., last August, and a 275-room Doubletree Guest Suites in Waltham, Mass., in November.

Earlier this year, HEI told HotelNewsNow.com that it may use some of its fund for joint ventures with the existing owners of distressed assets, making most or all of the debt pay-down and providing capital for renovations.

The Hotel Minneapolis should benefit from HEI’s involvement, said Kirby Payne, co-president of HVS Hotel Management in Newport, R.I. “HEI is a very experienced owner/operator with both the depth of hotel operating experience and cash necessary to reposition the hotel.”

However, Payne also applauded Hempel Properties for its work on the project. “Jon Hempel created an excellent adaptive reuse of a building and added to the fabric of the city. This area of Minneapolis is better as a result of his efforts.”

Marriott’s newest flag

Marriott launched the Autograph Collection brand in November. The new brand is comprised of independent upscale and luxury hotels with “distinctive personalities” in major markets worldwide.

In January, Marriott unveiled its first seven Autograph Collection hotels, including three properties in Florida, two in Georgia and one each in New Mexico and North Carolina. The Bethesda, Md.-based hotel chain plans to add approximately 25 hotels to the collection during 2010, calling the brand an “attractive platform for future growth.”

The Autograph Collection will include a variety of urban, historic, boutique arts hotels and resorts.

“Each hotel will be highly unique and distinct with its own identity, appealing to a growing segment of our customers who are looking for an experience that an independent hotel can deliver,” Marriott Executive Vice President of Brand Management Don Semmler said in a statement introducing the brand.

The Autograph Collection is a good fit for Hotel Minneapolis, said Steve Sherf, principal at Hospitality Consulting Group in Excelsior. The hotel will be able to retain its independent character while tapping into Marriott’s powerful reservation system and loyalty program.

“I think [Hotel Minneapolis] was probably underbranded with Doubletree,” Sherf said. “I think this property fits in perfectly with what Marriott is trying to do with the Autograph Collection. It might be a little early in the development of the brand, but Marriott is very good at promotions, so I think it will come on very strong.”

Reported by:  Mpls St Paul Business Journal