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The Globe and Mail

Sale of two Sutton hotels points to reviving industry

When Tom Gaglardi put in a $33-million bid on Edmonton's Sutton Place Hotel, he didn't expect to have to buy one of the most prestigious hotels in Vancouver to seal the deal.

But by the time he was done negotiating, his family-owned Northland Properties Corp. agreed to spend $198-million to buy the two Sutton Place Hotel properties from Hong Kong businessman Christopher Ho, in the biggest Canadian hotel deal since 2007.

"What we really craved was downtown Edmonton, but it turned out we weren't going to be able to do that on its own," Mr. Gaglardi said. "So we looked at Vancouver, and it's a spectacular asset. As someone born and raised in Vancouver, I know the location is second to none."

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The deal is one of several expected to close in the coming months, with stronger operating fundamentals and the relative abundance of capital drawing investors forward. There are about $650-million worth of hotel listings in Canada right now, as sellers look to get out just as the sector appears to be recovering from a brutal recession.

"I do think things are starting to happen again," Mr. Gaglardi said. "Money is still cheap, and if you're to make a prediction about whether the hotel world will be in a better place three years from now the answer has to be yes. We've finally gotten to the point where buyers and sellers are starting to match on deals."

The hotel industry has been slow to recover from the recession, with market research firm PKF Canada estimating profits declined by 33 per cent in 2009 as occupancy rates slipped below 70 per cent. But things are looking up. Occupancy rates rose 2.8 per cent to 72.6 per cent in the first week of June compared to the same time last year, and the average room price gained 1.3 per cent to $143.17 per night.

As occupancy and prices levelled, many in the industry expected a wave of sales in the first half of the year as recession-battered owners looked to get out and buyers found capital readily available. The anticipated flurry of deals never came, but this deal marks a turning point.

"I do think this sale is the first of several higher-profile properties we're going to see this year," said Bill Stone, an executive vice-president at CB Richard Ellis, which brokered the deal.

Along with the two high-end hotels, Northland obtained rights to the Sutton Place name. There are two other hotels in the small chain – in Toronto and Chicago – but they were not part of the deal and are still for sale. They will continue operating under the Sutton Place banner.

Northland isn't new to the industry, operating 45 Sandman hotels across the country. The company also owns and operates dozens of Denny's and Moxie's restaurants.

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The 23 deals that have happened this year have been relatively small – the largest so far was the $27.5-million deal for the 135 room Stonebridge Hotel Fort McMurray.

The biggest deal of the last five years was a $1.2-billion sale of 32 hotels to the British Columbia Investment Management Corp.

The Sutton deal is the second major transaction of the month, after Ivanhoe Cambridge sold its 48.5-per-cent stake in five Westin hotels to an unidentified institutional investor for an undisclosed amount. The Comfort Inn Vancouver Airport Hotel Richmond also sold recently for $8.5-million.



Sutton Place Vancouver – $164-million

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Sutton Place Edmonton – $34-million

Stonebridge Hotel Fort McMurray – $28-million

The Courtyard By Marriot, Edmonton – $26-million

Deerhurst Resort, Huntsville – $26-million

Delta Toronto East – $23-million

Holiday Inn, Pointe Claire – $12-million

Regal Constellation, Toronto – $10-million

Comfort Inn Vancouver Airport Hotel – $9-million

Travelodge Nanaimo – $6.5-million

Source: CB Richard Ellis

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