Radisson Blu or Sheraton possible brands for MOA hotel

A 501-room hotel planned for the Mall of America will not be branded as a Marriott Renaissance as originally planned. Instead, it will be either a Radisson Blu or Sheraton.

It’s a late-inning switch for the project and comes as the hotel developer, M.A. Mortenson Co., gets closer to finalizing a complicated $127 million financing package that will include capital from the hotel brand. If the deal proceeds as planned, construction probably will begin in late December.

As of mid-June, Marriott Renaissance’s name appeared on renderings of the hotel submitted to the city of Bloomington. Since then, Marriott International Inc. dropped out of the project and the two other hotel companies have been in talks with developers about the hotel, said Paul Campbell, senior vice president at Golden Valley-based Mortenson.

The external design won’t change, though some interior finishes will vary based on which hotel brand is selected, Campbell said. It will be an upscale hotel with 20,000 square feet of meeting space, a full-service restaurant, fitness center, spa and a second-floor skyway connection to the mall.

Radisson Blu is Radisson’s most upscale brand. It has nearly 200 properties in 55 countries, but is new to the United States. In May, the company announced plans for its first U.S. Radisson Blu, a 334-room hotel scheduled to open in Chicago in fall 2011.

Minnetonka-based Carlson Companies Inc., the parent company of Radisson, declined to discuss its interest in the Mall of America site. Carlson operates the 403-room Radisson Hotel and Water Park of America across Highway 77 from the mall.

Sheraton Hotels & Resorts, meanwhile, operates more than 400 upscale hotels in roughly 70 countries. It has five locations in Minnesota, including the 564-room Sheraton Bloomington Minneapolis South at the intersection of Highway 100 and Interstate 494.

Sheraton’s parent company, White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc., could not be reached for comment.

Kurt Hagen, the Mall of America’s vice president of development, said Bethesda, Md.-based Marriott dropped out of the project due to changes to the financing plan.

“The financing structure of the deal involves either some equity or mezzanine financing on their part, which wasn’t anticipated when we started down the road with Renaissance,” Hagen said. A deal with a hotel flag should be finalized within the next month, he said, declining to discuss the finalists due to a confidentiality agreement.

Financing plan
The 12-story hotel will be built on the Mall of America’s south side, where a surface parking lot now sits along Killebrew Drive, between two of the mall’s anchors, Macy’s and Bloomingdale’s. At 501 rooms, it will be Minnesota’s sixth-largest hotel.

The hotel is considered the first step of the mall’s broader Phase II expansion plans, which also call for 5.6 million square feet of additional mixed-use space north of the existing mall. That proposed project includes a Bass Pro Shops retail store, a Mayo Clinic health care facility, an ice rink, an indoor water park and various other retailers, restaurants, hotels and entertainment.

Mortenson plans to finance the hotel project through a variety of sources, including $40 million worth of recovery-zone facility bonds, a bond program that was created as part of the American Recovery and Reinvestment Act of 2009. The Hennepin County Board will vote later this month on whether to approve the use of the bonds, which would require that the project break ground before the end of 2010.

The Bloomington Port Authority plans to use $17 million in tax increment funds to build a 509-space, three-story parking structure, with one level below ground.

The rest of the funding will come from a yet-to-be-determined combination of equity and debt from Mortenson, the Mall of America and the eventual hotel flag. The flag may contribute between $20 million and $25 million in mezzanine debt, according to minutes from a June 14 meeting of the Bloomington City Council and the Port Authority.

It isn’t known who will own and operate the hotel following completion, Campbell said.

The project is expected to create more than 250 construction jobs with wages averaging $76 per hour, including benefits. The hotel would create another 240 full-time jobs, with an average wage of $16.77 per hour, including benefits, according to information provided to Hennepin County commissioners.

The city granted the hotel project final development-plan approval in July. Larry Lee, the city’s community development director, said that approval doesn’t require the developers to name a flag as long as the development fits the approved design.

The 494 strip in Bloomington remains one of the Twin Cities’ strongest hotel markets, thanks to its proximity to the Mall of America and Minneapolis-St. Paul International Airport. There are 37 hotels in the area with more than 7,000 combined rooms.

An upscale hotel at Mall of America should perform well for either Radisson or Sheraton, said Steve Sherf, president of Hospitality Consulting Group in Excelsior. “A lot of the market for that hotel will be Europeans and Asians who fly in, so any kind of international brand should do well there.”

Reported by:  Minneapolis St. Paul Business Journal