The offer for the 22-story, 255-room hotel near Block E and Target Center came out of the blue and was too good to turn down, said Benjamin Graves, president and chief operating officer of Graves Hospitality Co., its owner.
“We were not looking to sell the hotel, but they gave us a number we couldn’t refuse, so we had to say yes,” Graves said.
The deal is expected to close in early July. Terms weren’t disclosed, but Graves said the sale will set a new record in the Twin Cities hotel industry, beating prices offered even for properties that were sold before the 2008 recession.
Following a wave of recession-era distressed sales, the Twin Cities hotel scene has been relatively active, and prices for hotels have been rising as occupancy rates and room prices increase. The Grand Hotel, Hotel Minneapolis and the Ivy were all sold recently under duress. Part of the current demand for hotels is being driven by access to credit as lenders and institutional investors look for opportunities.
Graves 601 lately has been operating within 10 percent of its prerecession peak occupancy levels, Graves said.
Loews, which is part of the Tisch family real estate empire in New York, is known for operating high-quality, full-service hotels in urban and resort destinations. Graves 601 is its first hotel in the Midwest. Next February, it will open a new hotel in Chicago.
The hotel was completed in 2003 and initially affiliated with the Le Meridien chain. In 2005, Graves Hospitality renamed the hotel for its street address at 601 1st Av. N. and later affiliated with the Wyndham group. In 2012, Travel and Leisure magazine named it one of the best hotels in the world.
Graves Hospitality will continue to own and manage several other hotels, including a Marriott Residence Inn downtown. The company also manages 10 restaurants and plans to open another six by the end of the year.
Jim Graves, founder of Graves Hospitality, said in a statement that the deal will enable the company to redeploy capital. “This sale creates revenue for new development, management and investment opportunities that result in an even higher rate of return,” Graves said. “Accepting their offer was simply good business.”
The company is also pursuing development of the Excelsior Hotel on Lake Minnetonka and is bidding on a request-for-proposal to build a hotel at the Minneapolis-St. Paul International Airport.