Grand Hyatt hotel is up for sale after San Antonio City Council approval
One of San Antonio’s tallest hotels is getting a new owner. After opening in 2008 and facing financial shortfalls during the pandemic, the Grand Hyatt is expected to be sold to a nonprofit while Hyatt will still manage its operations after the city council approved the arrangement in a 7-0-3 vote Thursday.
The Grand Hyatt is one of the most notable buildings in San Antonio’s skyline with more than 1,000 rooms for guests and residential condominiums on its top floors. The agreement would take out $450 million in bonds and would sell the hotel to Community Finance Corporation in Arizona, which would own the hotel for 40 years until the new set of bonds is paid off. After that, ownership would transfer to the city.
Several council members expressed their concerns about how quickly the process was moving without much time to review it; three members abstained from voting.
The hotel has served as the de facto convention center hotel; it is adjacent to the Henry B. González Convention Center, which is owned and operated by the city. While the city doesn’t own the hotel, it does own the land it stands on. However, under the proposed sale of the hotel, the city would become the owner of the building in about 40 years. Hyatt would still manage and operate the hotel.
San Antonio Mayor Ron Nirenberg praised the plan shortly before casting his vote in support.
“Our debt is being recovered in terms of the (hotel occupancy tax) revenues that were used for that service during the pandemic,” Nirenberg said. “In addition to that, we are receiving upfront lease payments that were accrued and have not been paid up until this time and that’s happening immediately on financial closing of this deal.”
The hotel opened in 2008 with the help of $200 million in construction bonds authorized by the city council at the time.
Although hotel revenue was meant to pay back the construction bonds, the hotel was unable to make all of its payments during the pandemic. Under the 2005 agreement, the city was on the hook to pay any difference with hotel occupancy tax revenue.
The city had to pay about $10 million under that agreement. Its last payment was in January. The hotel has since resumed paying the debt.
Over the term of the lease with the city, Hyatt had not made about $4.9 million worth of lease payments.
The $450 million approved by the council will cover the money in past lease payments as well as the funds the city paid over the original construction bonds. The bonds would be financed by the Public Finance Authority of Wisconsin. With the new agreement, the city will not be liable for those payments.
Community Finance Corp. would own the building under the terms of the bond. The group bills itself as an organization with the purpose of lessening the burdens of government and to erect, finance the erection of, or maintain public buildings, monuments or works. It has worked on projects including fire stations, university housing, as well as prisons and detention centers.
Speaking to the council, David Peters, Hyatt’s Senior Vice President of Corporate Transactions, said the hotel chain was in support of the transaction and that Hyatt would continue to operate the hotel’s day-to-day services.
“We’d like to take the opportunity to reassure our guests, colleagues and the community that we will continue to brand and operate a hotel as a Grand Hyatt under long-term management contract,” he said.
The three council members who abstained from voting included District 2 Councilman Jalen McKee-Rodriguez, District 5 Councilwoman Teri Castillo and District 7 Councilwoman Ana Sandoval. McKee-Rodriguez said he had concerns from his constituents about the deal.
“Just generally about the Hyatt and people who feel the city has no business in the hotel industry … what business do we have owning a hotel?” he said.
McKee-Rodriguez asked if there were any public hearings held on the deal. The city’s Chief Financial Officer Ben Gorzell said one such hearing, known as Tax Equity and Fiscal Responsibility Act hearing which is required by the IRS when a nonprofit is involved in bonds, was held on the day before the city council vote. However, no members of the public attended, Gorzell said.
The clearing of the debt without having to use taxpayer funding was one of the reasons District 8 Councilman Manny Pelaez said he voted in favor.
“We’re not spending any of their tax dollars and will continue to own an asset and we’re doing this in a way that is open and transparent and we’re doing it with a corporation that is in good standing. I don’t see how this is not a win-win,” he said.
The sale is expected to close in the coming weeks.