The Hampton Inn at 1845 Sherman St. (Max Scheinblum/BusinessDen)
Paul Karmo’s family business is checking into Denver with a $24 million hotel purchase.
Karmo runs the Michigan-based hotel investment firm Delta Management, which bought the real estate for the 151-room Hampton Inn at 1845 Sherman St. in Uptown for $23.8 million earlier this month. That’s a discount of $3.6 million from what the property last sold for in 2016 when Rhode Island-based Magna Hospitality Group bought it.
Magna, the sellers in the recent deal, did not respond to a request for comment. Wells Fargo financed the purchase with a $15.4 million loan, according to public records. The hotel’s rates vary wildly by availability and season, but generally sit between $150 to $250 per night.
That $3.6 million discount is also the amount Karmo plans to spend in the coming years as he works to turn the property around. Karmo hasn’t bid out that project to any general contractors yet, he added.
“It’s going to look brand new by the end of the process,” Karmo said.
Hotel operators like Hilton demand certain standards and specifications in their properties to continue doing business there. The franchise “defines the scope” of the work, Karmo said, and it’s on him to fork up the money to make the upgrades happen.
Construction on the building will start by the end of next year, he added.
“We are a small family-run business just looking to expand, looking for a Class A property,” Karmo said. “My dad’s been in the hotel business since the early ’90s – we’ve mostly been in the metro Detroit area – but this year we’ve stepped into new markets.”
The company bought its first out-of-state property in downtown Indianapolis in January and followed it up with the purchase here on Sherman Street.
“[Denver is] just an attractive market, growing city, and we just want to be a part of it,” Karmo said.
But travel is down, supply is up, and the safety concerns about downtown are depressing the hotel market, said local hotel broker Chris Kilcullen with Avison Young.
“That’s why this property has not seen any real appreciation in the last 10 years,” he said. “I mean, it should, that’s why investors invest in hotels.”
Kilcullen has been a hotel broker for a decade, doing deals all over the country, including a dozen in the Denver metro area where he lives. He’s currently listing an early 1900s lodge for sale in Estes Park.
The influx of new hotel development in town means more rooms are competing for each travel dollar.
“It’s a very flat market right now,” he said. “There are different pockets around Colorado and then more concentrated in Denver that are better than others, but overall, the market’s been very, very soft.”
The Hampton Inn at 1845 Sherman St. (Max Scheinblum/BusinessDen)
Paul Karmo’s family business is checking into Denver with a $24 million hotel purchase.
Karmo runs the Michigan-based hotel investment firm Delta Management, which bought the real estate for the 151-room Hampton Inn at 1845 Sherman St. in Uptown for $23.8 million earlier this month. That’s a discount of $3.6 million from what the property last sold for in 2016 when Rhode Island-based Magna Hospitality Group bought it.
Magna, the sellers in the recent deal, did not respond to a request for comment. Wells Fargo financed the purchase with a $15.4 million loan, according to public records. The hotel’s rates vary wildly by availability and season, but generally sit between $150 to $250 per night.
That $3.6 million discount is also the amount Karmo plans to spend in the coming years as he works to turn the property around. Karmo hasn’t bid out that project to any general contractors yet, he added.
“It’s going to look brand new by the end of the process,” Karmo said.
Hotel operators like Hilton demand certain standards and specifications in their properties to continue doing business there. The franchise “defines the scope” of the work, Karmo said, and it’s on him to fork up the money to make the upgrades happen.
Construction on the building will start by the end of next year, he added.
“We are a small family-run business just looking to expand, looking for a Class A property,” Karmo said. “My dad’s been in the hotel business since the early ’90s – we’ve mostly been in the metro Detroit area – but this year we’ve stepped into new markets.”
The company bought its first out-of-state property in downtown Indianapolis in January and followed it up with the purchase here on Sherman Street.
“[Denver is] just an attractive market, growing city, and we just want to be a part of it,” Karmo said.
But travel is down, supply is up, and the safety concerns about downtown are depressing the hotel market, said local hotel broker Chris Kilcullen with Avison Young.
“That’s why this property has not seen any real appreciation in the last 10 years,” he said. “I mean, it should, that’s why investors invest in hotels.”
Kilcullen has been a hotel broker for a decade, doing deals all over the country, including a dozen in the Denver metro area where he lives. He’s currently listing an early 1900s lodge for sale in Estes Park.
The influx of new hotel development in town means more rooms are competing for each travel dollar.
“It’s a very flat market right now,” he said. “There are different pockets around Colorado and then more concentrated in Denver that are better than others, but overall, the market’s been very, very soft.”
