Although a deal calling for Ameriprise Financial Inc. to purchase the Hotel Ivy in downtown Minneapolis fell through last week, the owner of the upscale property is optimistic another buyer will soon be calling.
“There’s been a real resurgence in the hospitality business in Minneapolis,” said Jim Mayer, senior vice president of Dougherty Funding, which owns the Hotel Ivy at 201 S. 11th St.
In the past year or so, several hotels have changed hands, including the Hotel Minneapolis and the Comfort Suites, and the Hyatt Regency on Nicollet Mall just completed a $25 million renovation. A South Dakota firm called Regency Hotel Management is currently investing up to $9 million to renovate the old Nate’s Clothing store into a boutique hotel. And two publicly financed studies are currently underway to determine whether there’s a need for a 1,000-room hotel near the Minneapolis Convention Center.
When a tentative agreement between Ameriprise and Dougherty over the Ivy surfaced last summer, the investment services giant said the 136-room hotel could serve as a temporary home for employees and financial advisers traveling to the Twin Cities on business.
Ameriprise is the city’s third-largest employer, and its headquarters and client services buildings are within walking distance of the Hotel Ivy.
Ameriprise spokesman Paul Johnson wouldn’t elaborate on terms of the dashed deal, except to say the two “were unable to reach a mutually acceptable agreement.”
Now that the hotel will be put back on the block, hotel consultant Kirby Payne said a likely buyer could be an established hotel player in the market, a real estate investment trust, or a private equity firm.
“All the prospective buyers know the [Ameriprise] deal fell apart, so clearly they’re going to look for a way to get the price down,” said Payne, president of Rhode Island-based HVS Hotel Management. “These people are sophisticated negotiators, it will be interesting to see how badly Dougherty wants to get rid of it.”
The property, part of Starwood Hotels and Resorts’ Luxury Collection franchise, not only includes the hotel, but the Ivy Spa Club, the Porter & Frye restaurant, and a parking garage. Ninety-two condominiums at the site are not part of an impending sale, Mayer said.
Starwood brands are well represented in downtown, with the Westin-Minneapolis, Aloft, W Minneapolis-The Foshay, and Le Méridien Chambers, in addition to the Hotel Ivy.
The overall hotel market for the Twin Cities has leveled out in the past year, after increasing in 2010 and 2011, according to STR, a hotel consulting firm in Tennessee. The occupancy rate for the entire Twin Cities market was 64.1 percent, compared with 65.5 percent in 2007, before the Great Recession dampened both leisure and business travel.
Nationally, the hotel occupancy rate was 54 percent as of Jan. 26, an STR report said.
“We’re definitely above the national average. I’d say the market is pretty strong,” said Mark Stenglein, president and CEO of the Minneapolis Downtown Council, a group of local businesses. Noting that some national and international franchises are not present in Minneapolis, such as the InterContinental Hotels Group, Stenglein said, “We’re still pretty well represented in this market. But if more want to come here, we’d welcome them.”
A history from 1930
But the Ivy has always been a bit distinct. The historic, pyramid-style tower was originally built for the Second Church of Christ, Scientist in 1930. Additional phases were stymied by the Great Depression. The building was purchased by an investment company in 1965 and renamed Ivy Tower. By 1993, it was abandoned by a subsequent owner when the heating system failed.
A historic landmark, it remained relatively untouched until it underwent a $95 million renovation into a luxury hotel and condo property in 2008.
After a series of financial and legal setbacks, the Hotel Ivy was put into receivership 18 months after opening, and Dougherty Funding, the original lender, is now the owner.