Phoenix has officially sold the massive Sheraton Grand Phoenix hotel for $255 million — about $50 million less than what the city owes on it.
Hotel giant Marriott International purchased the 1,000-room hotel, according to a news release.
The Phoenix City Council voted to sell the hotel to TLG Phoenix — a subsidiary of Florida-based TLG Investment Partners — last year.
But earlier this year, Marriott expressed interest in owning the hotel and formed an affiliate with TLG Phoenix to purchase it. Marriott spokeswoman Connie Kim said Marriott International has 100 percent controlling interest.
Marriott International will manage the hotel and serve as the majority capital partner, with plans for a significant renovation of guest rooms and public space "to transform the property into a cutting-edge model for the Sheraton brand," according to a release.
Sheraton became part of Marriott International in the 2016 mega merger of Marriott and Sheraton parent Starwood Hotels & Resorts.
There are 115 Marriott International branded hotels in Arizona representing 21,629 hotel rooms under 21 different brands, including JW Marriott, AC, Sheraton, Marriott, The Ritz-Carlton, Moxy, W and Westin, Kim said.
"The hotel will provide a living and breathing showcase of our new vision for the Sheraton brand, underscoring our commitment to restore the brand to its leadership position," Marriott International President and CEO Arne Sorenson said.
According to the release, Marriott International plans to sell the hotel, subject to a long-term management agreement, after it renovates the building.
City spokeswoman Julie Watters told The Arizona Republic in May that TLG has told the city it intends to retain all current hotel employees.
Phoenix spent $350 million to build the hotel, which opened in 2008.
It was the biggest Sheraton to open since 1992 and the first to feature a modern look, including an internet café and plush beds.
It was built to help Phoenix attract more groups to the newly expanded convention center.
But its opening coincided with the Great Recession. Phoenix hotels were hit particularly hard by the economic downturn, which forced the city to spend $47 million to cover operating losses.
Now the hotel is turning a profit. In the past few years, it made $16 million, according to the city.
Still, the city council voted to sell the hotel in an effort to get taxpayers "out of the hotel business," according to multiple council members.
The sale was controversial because the city council agreed to a $97 million tax break for the new owners and the transfer of $13 million to use for repairs, in addition to selling the hotel at a loss.
Councilman Sal DiCiccio criticized the sale, and the entire history of the project. He said money lost from the project could have been better spent on more police officers or repaving roads.
"We welcome this new chapter for downtown Phoenix and look forward to the increase in financial capacity for the city and the long-term ownership and management of the hotel by private-sector experts," said Milton Dohoney, Phoenix assistant city manger and president of the Downtown Phoenix Hotel Corportation.
"Selling the hotel allows further development of the Phoenix economy while recognizing the value hotel guests and tourists bring to our city and the region, and gives the City Council opportunity to provide resources to our residents."
David Krietor, president and CEO of Downtown Phoenix Inc., said the sale is "really important for downtown" and will help continue the growth of the hospitality industry in the city center.
Krietor was the Phoenix economic development director when the city decided to build the hotel. He said it was important for the city to invest in the hotel when it did because downtown had only 1,300 hotel rooms prior to the Sheraton Grand's opening, which was not enough to support the expanding convention center.
"The investment in the hotel helped get downtown kick-started," Krietor said.
Today, downtown has almost 4,000 hotel rooms, with more on the way. He said it was always the city's plan to sell the hotel, and it was time to "get the city out of the operational risk of running the hotel."
"We've gone in 10 years from being really, really poorly positioned to being in a very strong place in terms of the hospitality element of the downtown economy," Krietor said.