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Lightstone Group recently purchased Crowne Plaza Boston North Shore in an online auction for $10.1 million. Mark Teiwes/Staff photo

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April 27, 2011

Buying Crowne Plaza hotel at auction was a big score in a tough market

By Ethan Forman Staff writer The Salem News Wed Apr 27, 2011, 05:02 AM EDT

You could say Lightstone Group got a pretty good deal in an online auction when it snapped up the North Shore's largest hotel, namely the Crowne Plaza Boston North Shore, long known as the Sheraton Ferncroft.

The new owners also got the relatively new CoCo Key Water Resort and 37,000 square feet of meeting space, all for a $10.1 million bid at auction. The purchase was made through two of Lightstone's real estate investment trusts.

New York-based Lightstone is one of the largest privately held real estate companies in the United States, with 10 million square feet of commercial space and 8,000 multifamily units in 20 states and Puerto Rico.

The amount the new owners paid for the 366-room hotel works out to be $27,000 per key or hotel room.

Ryan Colbert, an acquisition officer for Lightstone, said that in the coming months the new owners plan to invest an additional $10 million in improvements to the hotel and conference center that straddles Danvers and Middleton.

"I think the opportunity here for us is to take what is an underperforming property, bring it up to brand standards and reposition" the hotel, Colbert said. He termed the sale "a value-added reposition play." The acquisition of the hotel was Lightstone's fifth commercial acquisition in the past nine months.

Lightstone was able to buy the Crowne Plaza after the hotel's ownership group auctioned it off along with nine other hotels around the country, hotels that had also been expanded with CoCo Key Water Resorts. Bidding took place in mid-February and started at $6.9 million.

Lightstone plans to make improvements to public spaces, furnishings, systems, an elevator, general branding and signs, Colbert said. About 300 people work at the property.

Lightstone is buying a property in which its former owners have already invested millions, in the form of New England's first indoor water park, plus room, hallway and other improvements.

The 65,000-square-foot, pelican-themed CoCo Key water park cost about $18.6 million to build, while WPH spent at least $3.4 million to fix up rooms; install a Starbucks; make improvements to hallways, an elevator and the first floor; and install a new roof, according to permits on file with building departments in Middleton and Danvers.

The price Lightstone paid is far below the $26.6 million the former owners, WPH Boston LLC, paid Ferncroft Hospitality for both the hotel and the Robert Trent Jones Sr.-designed golf course in Middleton and Topsfield in late 2005.

However, in 2006, WPH sold off the golf course and country club for $13 million to help pay for the water resort and the hotel upgrade, so any comparison to past sales must take that into account.

WPH Boston LLC is an affiliate of Denver-based Sage Hospitality Resources, a hotel management company, which was part of a group that built the water park. Though Sage no longer owns the Crowne Plaza, it will remain its manager.

"Sage is the existing property manager," Colbert said, "and they are the current property manager. We are anticipating business as usual."

Andrew Calvo, a New Jersey real estate and hotel industry blogger who wrote about the sale in his blog, PassionsOf AZealot.com, said the story of the hotel is similar to other real estate projects that have struggled amid the recession.

"Lightstone bought a great opportunity to rebrand a hotel they purchased for cheap which happened to include a water park in the Boston vicinity," Calvo said in an e-mail. "It was built during the boom times and in my opinion wasn't a solid development project to begin with."

Calvo says running a water park can be expensive, given the need to staff and maintain it. One good sign is there appears to have been bidding for the hotel. Other hotels that have sold recently have done so at a steep discount.

"That's the reality of the real estate market these days almost anywhere you look in America," Calvo said.

Calvo said Lightstone made a good investment, given the group paid far less than it would cost to replace the hotel, even with the planned $10 million in improvements.

Staff writer Ethan Forman can be reached at 978-338-2673, by email at eforman@salemnews.com or on Twitter @DanverSalemNews.

Changing hands

The acquisition by Lightstone is just the latest for a hotel built in the mid-1970s on a hill overlooking Interstate 95 and Route 1.

In 2003, Starwood Lodging Trust or SLT Realty Ltd Partners, part of Starwood Hotels and Resorts, sold the property to Ferncroft Hospitality for $31.9 million. This price included the golf course, according to the Middleton Assessors Office.

In 1997, SLT purchased the hotel and golf course from Thomas Flatley for nearly $55.2 million.

In 1984, Flatley bought the Ferncroft for $16.1 million.

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