San Antonio’s Grand Hyatt Hotel may go up for sale to pay off city-backed bond debt
The Grand Hyatt Hotel next to San Antonio’s Henry B. Gonzalez Convention Center is going up for sale — and there’s already a potential buyer.
Construction on the 1,000-room hotel began in 2005 using $200 million in revenue bonds that were backed by the City of San Antonio. Hyatt had been making the necessary payments but after falling short during the pandemic, the city began taking over some of the payments. Now, the Grand Hyatt may be sold to an out-of-state nonprofit in a deal that would settle the debt.
The remaining 2005 revenue bonds total about $168.3 million. The city has paid $10.4 million in hotel occupancy tax revenue to cover the shortfall. However, the last payment in January was completely paid for by Hyatt revenues. Hyatt owns the hotel, and the city owns the land, which sits at the corner on Interstate 37 and Market Street.
City officials said Thursday the Grand Hyatt essentially acts as the convention center hotel and is a selling point for conventions utilizing the city to have immediate access to its facilities.
“The land and the hotel are important assets given their proximity to our convention city and our Alamodome,” said Ben Gorzell, Chief Financial Officer for the city.
Gorzell and City Manager Erik Walsh said Hyatt’s payments on the ground lease to the city had accrued to $4.9 million since the lease was incepted and remained unpaid by Hyatt.
Phililp Stramm, area vice president and general manager for the Grand Hyatt, said through a spokesman that Hyatt is actively exploring the sale of its ownership interest of the hotel to a third-party nonprofit.
“The proposed sale is part of Hyatt’s asset-sale strategy to transform toward a more fee-based earnings mix, fund Hyatt’s continued growth in key markets where our guests are traveling, and fuel new lines of business that strengthen opportunities to care for guests in more ways and more places,” he said via an emailed statement.
Stramm added the potential transaction would be a positive impact for the city and community. “We want to reassure our colleagues, guests, customers and community that with this proposed transaction, Hyatt plans to continue managing Grand Hyatt San Antonio River Walk under a long-term management agreement, and we do not anticipate any business disruption at this time,” he said.
Under the plan, Hyatt would sell the hotel to Community Finance Corp, based in Tucson, Arizona. New bonds up to $450 million would be issued by the Public Finance Authority, a governmental entity established under the laws of the State of Wisconsin.
“It will also set up some operating reserves and some debt reserves for the hotel going forward, it will pay for the cost of issuance, and then it will finance through the nonprofit the acquisition of the Grand Hyatt from Hyatt and that will be how the non profit acquires ownership of the hotel,” Gorzell said.
Community Finance Corp bills itself as a nonprofit corporation “which exists for the purpose of lessening the burdens of government and to erect, finance the erection of, or maintain public buildings, monuments or works,” according to its website.
If the plan is approved, CFC would own the hotel and make payments on the bond over the next 40 years. Hyatt would still operate and manage the hotel for at least 30 years. The bond would be paid back using hotel revenue and the city would not be responsible for making up any lack of payment.
After the bond is repaid, CFC would then transfer ownership of the hotel to the City of San Antonio. That could occur around the year 2060 or earlier if repaid sooner.
The decision is subject to city council approval, which will consider this item on March 3.
This story has been updated and includes a correction about the bond issuance. The story previously stated the city would issue the new bonds. However, the Public Finance Authority in Wisconsin will be the issuer.