Downtown Memphis' largest hotel is for sale, and it's located in arguably Downtown's most advantageous block of real estate not called Beale Street.

Earlier this month, The Commercial Appeal reported the 600-room Sheraton Memphis Downtown Hotel, located at 250 N. Main St., is up for sale. (The hotel will continue normal operations.)

Atlanta-based Hunter Hotel Advisors is the real estate company representing the seller. Spencer Davidson and Tim Osborne of Hunter Hotel Advisors are the brokers managing the deal. The Sheraton listing was recently removed from Hunter Hotel Advisors' website. However, Osborne said the property is still being marketed. No additional information could be provided at this time from the real estate company.

Regardless of who buys the hotel, the consensus among local officials and hospitality experts is the Downtown Memphis Sheraton needs more than a fresh coat of paint. The site's restoration requires a significant modernization and hundreds more guest rooms.

The economic impact potential of a renovated and expanded 900-room property adjacent to the Renasant Convention Center would be comparable to FedExForum's economic impact, said hospitality consultant Chuck Pinkowski of Pinkowski and Co.

Hotel Memphis LP, a joint venture between Starwood Capital Group and Kentucky-based Schulte Hospitality, purchased the Sheraton property in 2017. The Sheraton was built in 1985 and was last renovated in 2004 with a 204-room expansion. Representatives from Starwood Capital declined to comment, at this time, for this article.

In October 2022, the Center City Revenue Finance Corp., an affiliate board of the Downtown Memphis Commission (DMC) approved the ownership group for a 30-year payment-in-lieu-of-taxes (PILOT) for a proposed $226 million expansion at the site.

The plan included an $86 million renovation for the hotel along with another $37 million investment for upkeep and guest room improvements over the 30-year term. In addition to that $123 million in renovation and upkeep, Hotel Memphis LP proposed a $103 million investment for a 300-room tower adjacent to the existing property.

The PILOT incentive was never finalized and the DMC was notified that the ownership group was no longer moving forward with the planned renovation and expansion. Representatives for the DMC did not return requests for comment regarding the future of the Sheraton Hotel property.

That renovation, however, has long been overdue. Even as the hotel searches for new owners, the issue now is will the new ownership capitalize on the site's potential?

"The most critical thing is getting the renovation done," Pinkowski said.

No matter who buys it, a modernized hotel is 'critical'

The renovation is critical, said Dean Dennis, senior vice present and general manager of the Renasant Convention Center.

"It was critical five years ago," Dennis said. "The sooner the better, we would've liked to see it already started."

Pinkowski acknowledged that at the bare minimum the existing 600 rooms need to be in market condition. Ideally, the renovation and the 300-room expansion happens, he said.

A sentiment echoed by Dennis, who said an ideal room block for the convention center would be around 1,500 rooms. Having to book that number of rooms now requires 10 to 12 hotels and turns into a competitive issue with other markets, he said. The room block issue and lack of rooms nearby the Renasant is something Dennis has previously referred to as an "Achilles' Heel" for Memphis.

"The appeal of Memphis weakens because planners can go to other cities and get 1,500 rooms in one or two properties," said Kevin Kane, Memphis Tourism CEO and president.

The consensus among officials is the Sheraton not only needs a renovation but also an additional 500- to 600-room hotel nearby.

Right now, the Sheraton remains the largest hotel within the Memphis market. (The Peabody hotel is the next largest at 464 rooms.) According to a January 2024 report from Pinkowski and Co., there are 15 hotels planned or under construction within Downtown for a total of 2,435 rooms, only two of those have more than 200 rooms. Those two are the 364-room Grand Hyatt, which is currently on hold, and a 406-room unnamed hotel that is part of developer Tom Intrator's $1 billion proposed Pinch District development.

"A convention center hotel is a priority,"  Wayne Tabor, president of the Metropolitan Memphis Hotel & Lodging Association. "You have to do something with that property."

The full-service hotel issue within Memphis and the plethora of small, sub-200 room hotels is nothing new for the market. Yet, the Sheraton sale doesn't erase that issue — it hastens, and perhaps even complicates, it.

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Memphis city assistance or bust

The first issue is financing. The consensus among Memphis city officials and hospitality experts is that the Sheraton deal will require a public and private partnership.

Pinkowski believes the property, for its potential, will need 900 rooms total, including the previously proposed 300-room tower expansion. At an even $300,000 per key, that expansion would be $90 million by itself, not including the cost and time for renovation, he said. Including the renovation costs, the deal would require city assistance.

"You won't see a project of this size with only private equity," Pinkowski said.

Estimating closing on a deal will take the better portion of a year, the earliest he expects anything to be completed would be late 2026.

Tabor echoed the sentiments regarding the need for a public-private partnership. He also said whoever buys the hotel will need to look at not just a renovation, but also improving the total square footage for meeting space.

"The Sheraton Hotel property is an important asset in our local tourism ecosystem. The city will be as engaged as necessary in order to ensure that we have a strong ownership partner who is poised for success," Memphis Mayor Paul Young said.

Young was the president and CEO of the DMC when the Sheraton Hotel PILOT incentive was approved in 2022. Next week, on the Center City Revenue Finance Corp. agenda for its Feb. 13 meeting, the 100 N. Main redevelopment project is seeking a near identical incentive package to that of the previously approved Sheraton package.

100 N. Main Development Partners, led by  Kevin Woods, Billy Orgel, Jay Lindy, Michael McLaughlin and Adam Slovis, is seeking a 30-year PILOT along with a 5% Tourism Development Zone (TDZ) surcharge for the proposed $280 million mixed-use development. The redevelopment of the 38-story tower includes a 160-room full-service hotel with 8,000-square-feet of meeting space. (The project held a ceremonial groundbreaking in December 2023.)

The TDZ surcharge is generated from room and occupancy revenue along with food and beverage-generated sales and revenue. Those funds are used to help pay for the construction costs. Tennessee has eight state-designated Tourism Development Zones, including three in Shelby County: Downtown Memphis, Memphis Fairgrounds and Graceland. The Downtown zone expires in 2031. (Per state guidelines, if revenues generated within the zone are not sufficient the supporting municipality is required to repay the debt and sources for those backup funds.)

Could Loews Hotels be back in the mix?

The other issues are room total and the renovation timeline. Dennis said he doesn't expect the hotel to close during renovations and said the convention center has continued operating well and has not been affected by the sale listing.

The renovation work, however, remains a cardinal component.

"It is paramount we find a good owner who is committed to renovation," Kane said.

Dennis said the Renasant Convention Center has historically been a "SMERF" market. The acronym refers to social, military, educational, religious and fraternal groups. Since the convention center's $200 million renovation, there has been a desire to shift toward a corporate business market.

"A higher quality hotel drives more of the hotel business," he said. "Without a renovated property next door it is a reason why the convention center has punched below its weight because the hotel wasn't renovated properly."

Tabor said he is aware of local and out-of-area investors who have asked about the sale package for the Sheraton Hotel site, however, he is unaware of any concrete offers, proposals or interested parties past that.

No potential buyers for the Sheraton have been named or linked to the site yet, however, Kane said he has reached out to Loews Hotels to gauge its interest in the Memphis market still.

Loews Hotels was looking at building a 500-room hotel near the Renasant Convention Center in 2018, and the deal was put on hold in 2020 due to the COVID-19 pandemic. In February 2022, the DMC shared a news release publicly announcing the deal was no longer moving forward. Loews Hotels representatives did not return a request for comment in time for publication of this article.

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What is the potential for the Downtown Sheraton site?

Despite the Sheraton's shortcomings, the nearby Renasant Convention Center has continued to perform admirably.

According to a 2023 convention center annual report, between June 2022 and June 2023 the convention center hosted 152 events, with a total of 340 days with at least one event happening within the building. In total, the Renasant Convention Center was responsible for 72,240 direct hotel room bookings and $60 million worth of economic impact.

In comparison, the Kentucky International Convention Center in Louisville hosted 42 groups in 2022 for a total of 107,694 room nights and a total economic impact worth $86.8 million. In 2023, the convention center contributed to 145,881 room nights between 40 groups for a total of $80.9 million in economic impact. (The Louisville convention center underwent a $207 million renovation in 2018.)

In 2023, the New Orleans Ernest N. Morial Convention Center hosted 114 events with 638,051 attendees. Those events represented a total of 548,750 room nights, said Tim Hemphill corporate vice president of the New Orleans Ernest N. Morial Convention Center.

Between July 1, 2022, and June 30, 2023, the Music City Center in Nashville had more than 164 events contributing to 413,600 room nights — a direct economic impact worth more than $537 million, according to the convention center's 2024 annual report.

The Music City Center is also significantly larger than the Renasant Convention Center with 2.1 million square feet, compared to the 300,000 in Memphis. However, the economic impact created by convention centers and surrounding Downtown districts cannot be underestimated.

Kane said Memphis Tourism is helping fund a study looking into what a convention center district might look like.

Dennis said a number of meetings, including one at the end of January, have been held with several community stakeholders including staff from Bass Pro Shops, St. Jude Children's Research Hospital, MATA and the DMC. He said the goal is to look at ways to ensure the convention center isn't on an island.

"How do we make this north end better for us, for clients, and for the city?" Dennis said.

Both Kane and Dennis said the key parts of the study will help determine how the area surrounding the convention center can complement and compare to the rest of Downtown.

Dennis said the study is still in the preliminary stages but a masterplan for a convention center district would look at ways for it to be a district with a comparable economic impact to that of Beale Street and FedExForum.

Tabor agreed that the potential for the convention center district (including a 1,500 room block) could be comparable to FedEx Forum. He added that such a district would operate as another "spoke in the wheel" for Memphis tourism and compliment existing entertainment districts that already benefit the city and Shelby County.

"The market will determine the potential of that property," Kane said regarding the Sheraton site in Downtown Memphis.

Neil Strebig is a journalist with The Commercial Appeal. He can be reached at neil.strebig@commercialappeal.com, 901-426-0679 or via X: @neilStrebig.

This article originally appeared on Memphis Commercial Appeal: Sheraton Downtown Memphis for sale: Why the site is key for tourism