Sheraton Center City among hotels sold to Blackstone Group

Among the package of 14 hotels that Blackstone Group L.P. of New York has bought from Columbia Sussex Corp. in exchange for acquiring its debt is the Sheraton City Center at 17th and Race Streets.

"I think change is good, in general, and I think the staff is excited about moving forward with new ownership," Paul Schwartz, general manager of the hotel for the last five years, said Thursday.

But the scope of that change, and whether the hotel will remain a Sheraton or become another brand under the new owner, remains to be seen.

Blackstone Group, which also owns Hilton Hotels Corp. and is considered the largest private-equity firm in the world, did not respond immediately to requests for comment. Nor did Columbia Sussex, of Crestview Hills, Ky.

What is known is that Blackstone bought the junior debt on the 14 hotels last week, and it could move to seize ownership of them. It did own the hotels five years ago.

In 2005, Blackstone paid $1.4 billion in equity for the former Wyndham International Inc. and sold half the Wyndham hotel portfolio to Columbia Sussex later that year.

Known as the Wyndham Franklin Plaza Hotel at the time, the property became a Sheraton under Columbia Sussex.

A June report by Fitch Ratings Inc. said a $539 million mortgage on the hotels that was due this month had been turned over to a firm specializing in troubled commercial-property loans because of imminent default.

Blackstone, which is expanding its lodging holdings, has bought portions of mezzanine debt tied to that mortgage from a contingent of banks and hedge funds that may allow it to take over the hotels as early as this month, according to Fitch. Among them were Northstar Realty Finance Corp., Fortress Investment Group L.L.C., and Bank of America Corp.

Though Sheraton City Center's immediate future is in flux, hoteliers and convention officials underscored its importance to the downtown mix.

The hotel is considered in the "upper upscale" segment, according to Smith Travel Research Inc., which tracks the U.S. hotel industry. Chief competitors are the Philadelphia Marriott, Loews Philadelphia Hotel, Crowne Plaza Philadelphia Center City, and the Courtyard by Marriott for leisure and business guests. To some extent, the Sheraton also competes with the DoubleTree Hotel Philadelphia for group and meetings business.