Tuesday, June 15, 2010

Broker: Hotel would need to be torn down

by Luci Scott The Arizona Republic Jun. 12, 2010 12:00 AM

Elevation Chandler, the partly built hotel with a mortgage of $24 million, could realistically be sold for $5 million to $6 million, a top commercial broker says.

Moreover, a buyer would need to tear it down because a market no longer exists for another big hotel, and the steel shell has probably deteriorated so much that it's no longer sturdy and safe.

Brent Moser, executive vice president of Cassidy Turley BRE Commercial, said the 10.6-acre property at Price and Frye roads is worth whatever the land is worth, and that depends on its intended use.

When construction began in 2005, a hotel may have been a good use, he said. "But quite a bit of hotel product has been built in the last years in that submarket, and it will be a couple of years before that use makes sense again," Moser said.

Another possible use would be Class A office space, which Chandler officials had pondered. But office space is overbuilt.

The best use of the property would be made by a retail tenant that wants to be close to Chandler Fashion Center, Moser said.

The market now for a retail user could be $10 a square foot, making the site worth $5 million to $6 million, he said.

Moser has talked with contractors, and the consensus is the buyer would need to demolish the abandoned existing structure. Steel, concrete and plumbing can't be exposed long to the weather.

"There are questions out there as to whether that structure can be utilized," he said. "My guess is they'd have to start over."

He put demolition costs at $400,000.

Moser suggested a logical retail tenant would be high profile, such as an Ikea or other furniture store; higher-fashion users such as boutiques; or a big-box store.

A big box of 150,000 square feet would need a larger parcel, because the conventional formula is having a building cover about 25 percent of land. So the buyer would need to pick up some land to the south, although that would take work to get the extra land rezoned from office to retail.

"I've got to think Chandler is going to be pretty cooperative, given the fact that eyesore has been there going on three or four years now," Moser said.

"That's not to say the retail world is going gangbusters right now, but there are tenants still lurking around the city looking for new locations," Moser said.

Plus the Chandler Fashion Center is so successful, it would be a big draw to a new neighbor.

Whatever goes on the spot, it won't be soon.

"It's such a legal nightmare that I would speculate it's at least another 18 to 24 months before all of the lawsuits . . . and whatever mess that's out there gets flushed out of the system so the property can be sold and developed."

The rehabilitation process would be expedited if Chandler dedicated some redevelopment funds, he said.

"It could be argued that this is a blighted property, although it sits in proximity to one of the most successful retail projects we've seen in 20 years in Phoenix," Moser said.

"It may take some cooperation like that to pry it away if it winds up in Point Center's (Point Center Financial, the mortgage holder) hands."

It would take another six or seven years to justify luxury condominiums and a hotel of the magnitude that developer Jeff Cline had in mind, Moser said.

The dream for that site wasn't bad, Moser said.

"It was a great location and a great project that may have overshot the condo portion a little."

Bruce D'Agostino, executive director of the Washington, D.C.-based Construction Management Association of America, doubts a buyer would build on the skeleton.

"That structure would have to come down," he said. "Nobody is going to assume the liability on that."

Broker: Hotel would need to be torn down

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