Developer sees dollar signs in plan to build two airport hotels

Company to study market demand, negotiate terms with airport officials

Despite lagging demand and an oversupply of rooms in the region, the developer proposing two hotels at Sacramento International Airport is eager to start work.

The Sacramento County Board of Supervisors voted 5-0 on Wednesday to negotiate an agreement with Sonnenblick Industries LLC. Three years after plans for an airport hotel were scrapped, the Pacific Palisade company has proposed privately financing a 132-room budget hotel and a 200-room full-service hotel at no cost to the county. One reason, said company chairman Bob Sonnenblick: The airport’s former 89-room hotel, which was leveled to make room for the new Terminal B, had the highest occupancy of any hotel in Sacramento County for 40 years.

“It was kind of an old, grade B-minus hotel,”
Sonnenblick said. “Imagine what a good quality hotel would do in an even better
location within the airport and with a new $1 billion terminal to feed into it… I’m very excited about this project.”
Bob Sonnenblick
chairman,
Sonnenblick Industries LLC

The success of on-airport hotels in Sacramento will depend upon the success of the airport itself, said Alan Reay, president and founder of Atlas Hospitality Group. “That’s the big gamble there,” he said. “It’s really going to depend on the forecast for traffic at Sacramento International.”

Sonnenblick funded an initial feasibility study that indicated the airport could support two hotels with more than 20,000 square feet of meeting space.

As part of the agreement with the county, Sonnenblick will now commission a study to provide more in-depth information on market demand. Airport staff also will begin negotiations with Sonnenblick to finalize other terms and conditions, such as rent. The board will consider a more fully negotiated agreement at a later date. Linda Cutler, deputy director of commercial strategy for the airport system, said it’s standard practice for airports the size of Sacramento International or larger to offer a hotel. Sacramento draws travelers from a wide geographic area, including Napa and the Central Valley, who may take flights that leave early or land late, she said. She said there’s real value in being able to offer travelers an on-site hotel as an alternative to having to find ground transportation to get to a hotel in nearby Natomas, for example.

In addition, she said, hotel amenities, from business centers to restaurants, would generate revenue for the airport.
Sonnenblick proposes a development team that would include Gold River-based Tricorp Hearn Construction Inc. and San Francisco-based RYS Architects. The company’s proposal estimates gross revenue of $19.2 million in the first year and $30.4 million by year 10, according to a county staff report.

The proposal comes as Sacramento’s hotel market — which added space at a furious rate before being hit hard by the Great Recession – struggles to recover. In February, year-to-date hotel occupancy in Sacramento was 53.3 percent, up from 52 percent for the same two-month period a year earlier, according to figures from Atlas. Occupancy rates in 2006 exceeded 70 percent.

Airport hotels at San Francisco and Los Angeles are doing fantastic, Reay said. But the smaller Ontario International Airport – which, like Sacramento, poured big money into an expansion – has seen passenger traffic drop dramatically and is facing possible closure.

But Reay said Sacramento may be very different from Ontario, and less likely to lose business since alternative air travel is more than an hour away.
“There is no substitute for Sacramento,” he said. “I don’t think Sacramento will suffer the same fate.”
The airport, meanwhile, is working to attract new carriers – and passengers.

Just this week, the Sacramento County Board of Supervisors approved an incentive package totaling $400,000 to try to attract low-fare airline Virgin America Inc. to the airport. Airport officials have been in talks with Burlingame-based Virgin America for several months about adding service between Sacramento and Los Angeles.

Two New Hotels Costing $100 Million Planned for Sacramento Airport

Sonnenblick Development LLC, which helped develop Loews Santa Monica Beach Hotel, will spend $100 million on two hotels at California’s Sacramento International Airport, the site’s first new lodging properties in 30 years.

The Los Angeles-based company won the contract to build the hotels, to be attached to the airport’s new Terminal B, according to Robert Sonnenblick, the company’s principal. Construction of a 225-room full-service hotel and a 150-room limited-service property will start in mid-2013, with an opening planned for the first quarter of 2015, he said.

Hotel development has been stagnant in California and across the U.S. because construction financing has been difficult to obtain, according to Sonnenblick. The Sacramento airport’s only hotel, a 150-room property from the mid-1970s, was demolished to make room for the new terminal, he said.

“An airport of this size can support several hotels but currently has none,” Sonnenblick said. “We see this as a specific opportunity that provides us with a monopoly in the foreseeable future.”

Sonnenblick’s company will begin interviewing potential hotel operators for the airport properties this month, he said. The contract to build the hotels is with Sacramento County, which is leasing the land to Sonnenblick Development.

The firm has spent $100 million over the past two years to buy seven parcels on the U.S. coasts, in locations it hasn’t disclosed, for luxury resorts.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net

Sonnenblick’s Hotels project at Sacramento airport approved for takeoff

The Sacramento County Board of Supervisors voted 5-0 Wednesday to move ahead on a proposal for the private development of two hotels on airport property.

Sonnenblick Industries LLC has proposed financing the development of two hotels at Sacramento International Airport , three years after plans for an airport hotel were scrapped because of the flailing economy.

Airport staff will now begin negotiations with Pacific Palisades — which will design, develop and operate the hotels — to finalize other terms and conditions, such as rent. Sonnenblick also will commission a feasibility study.

The board is expected to consider a more fully negotiated agreement at a later date.

Sacramento International Airport opened a $1 billion terminal last fall, replacing a structure that is four decades old with a much larger terminal and concourse.

What had been a nearly $1.3 billion project shrank to $1 billion after airport executives shelved plans for a hotel and parking garage during the recession.

Sacramento International had a hotel on site before the new Terminal B was constructed. The 89-room Host Sacramento Airport Hotel closed in August 2008 and was leveled to make room for the new terminal.

Sonnenblick’s proposal was the only one submitted by the Jan. 30 deadline in response to a request for proposals issued Nov. 3.

Sonnenblick proposes a full-service 200-room hotel and a more limited service hotel with 132 rooms.

The company’s proposal estimates gross revenue of $19.2 million in the first year and $30.4 million by year 10.

Melanie Turner covers energy, environment, clean technology, agriculture, transportation, media and marketing for the Sacramento Business Journal.

Sonnenblick puts Sacramento airport hotels back on table

Sonnenblick Industries Inc. has proposed financing the development of two hotels at Sacramento International Airport, three years after plans for an airport hotel were scrapped because of the flailing economy.

The Sacramento County Board of Supervisors is set Wednesday to consider negotiating an agreement with the Pacific Palisades company for the design, development and operation of two hotels on airport grounds.

If the board agrees to move forward on such a project with Sonnenblick Industries, airport staff would begin negotiations with the company to finalize other terms and conditions, such as rent. The board would consider a more fully negotiated agreement at a later date.

Sacramento International Airport opened a $1 billion terminal last fall, replacing a structure that is four decades old with a much larger terminal and concourse. The Big Build was the largest public works project in Sacramento history.

What had been a nearly $1.3 billion project shrank to $1 billion after airport executives shelved plans for a hotel and parking garage.

Sacramento International had a hotel on site before the new Terminal B was constructed. The former Host Sacramento Airport Hotel closed in August 2008 and was leveled to make room for the new terminal.

Meanwhile, the Sacramento County Airport System has been researching the possibility of bringing back a hotel since early last year. The airport system hired Dallas-based Corgan Associates Inc. to identify potential hotel sites. Corgan identified a site between terminals A and B, and another between Terminal B and the airside concourse.

The county moved ahead Nov. 3, issuing a request for proposals. Sonnenblick’s proposal was the only one submitted by the Jan. 30 deadline.

Sonnenblick proposes two hotels, with 132 and 200 rooms. One hotel would feature a 20,400-square-foot conference and meeting space, business center, pool, full-service spa and fitness center.

Sonnenblick proposes a “strong development team” of three primary companies:

• Los Angeles-based real estate development firm Sonnenblick Development would be responsible for financing, marketing and public relations. The company is known for creating unique and innovative lease and financing structures, and for projects such as The Ritz Carlton Hotel in Pasadena and the Los Angeles World Trade Center.
• Gold River-based Tricorp Hearn Construction Inc. would be the general contractor. Local hotel projects have included Le Rivage Hotel on the Sacramento River, Hyatt Place Hotel at the University of California Davis and the Hampton Inn & Suites Hotel West Sacramento.
• San Francisco-based RYS Architects would provide architectural services. Local projects have included the Best Western in Rancho Cordova and Homewood Suites by Hilton in Natomas.

Sonnenblick has proposed financing both hotels. The company’s proposal estimates gross revenue of $19.2 million in the first year and $30.4 million by year 10, according to a county staff report.

Robert Sonnenblick has been chosen by Opal Financial Group to lead its Hotel Industry Panel at the upcoming “Real Estate Investors Summit”.

PRESS RELEASE:
For public distribution 4‐5‐2012
Los Angeles‐based real estate developer Robert Sonnenblick of Sonnenblick Development LLC has been chosen by Opal Financial Group to lead its Hotel Industry Panel at the upcoming “Real Estate Investors Summit”. The deal‐making conference will be located at The Perry Hotel on South Beach (Miami), Florida on April 27th at 10am.

Also joining Mr. Sonnenblick on the panel will be Mr. Ben Cary, Director of Development at Starwood Hotels, and Mr. Chris Cargen, President of Hospitality America, Inc.

For more information, please see www.Opalgroup.net and www.SonnDev.com