CAI Investments Could Lose Tempe Hotel in Foreclosure Sale

A 290-room hotel in Tempe faces a foreclosure auction after CAI Investments defaulted on a $86.5 million loan.

The 18-story Westin Tempe is set for the auction block this week after the Las Vegas-based developer fell behind on the loan tied to the property at 11 East 7th Street, nine miles east of Phoenix, the Phoenix Business Journal reported.

The lender, Dallas-based Hall Structured Finance filed a notice of trustee sale in January. A foreclosure auction was scheduled for April 25, then delayed six times until May 17, at the Arizona Superior Court building in Downtown Phoenix.

“This is not atypical,” Craig Ganz, an attorney at Ballard Spahr in Phoenix, said of the unexplained delays to the Business Journal. “The lender and borrower will often engage in settlement discussions even after the trustee sale has been noticed.

“At the end of the day, a successful negotiation will help keep the borrower out of a potential bankruptcy, and keep the lender from having to own and operate a hotel.”

The Westin Tempe, which opened in 2021 next to the campus of Arizona State University, was billed as a higher-end destination for business travelers headed for Tempe, among the fastest-growing business sectors in greater Phoenix, according to the Business Journal.

CAI Investment bought the 0.85-acre site in 2017 for $8 million. A year later, it broke ground on the hotel, according to Maricopa County records. In 2019, CAI closed on a $86.5 million construction loan from Hall Structured Finance.

Hall President Mike Jaynes said at the time that the Tempe hotel’s “premier location in this market” and Westin and Marriott’s loyalty program made the project “a great fit for our loan program.”

CAI Investments, which owns the Tempe property under its CAI Tempe Hotel Partners affiliate, modified its loan agreement with Hall numerous times last year.

On Dec. 15, CAI missed a $5 million payment deadline, while also failing to pay a $600,000 modification fee and an $87,347 tax escrow payment, according to the notice of trustee sale.

The owner of the Westin Tempe didn’t respond to questions from the Business Journal about the pending foreclosure sale.

After the notice of the trustee sale was filed in the winter, CAI started looking for a potential buyer. The hotel has been on the market with a list price of $115 million. The property is marketed as a 25-year NNN sale-leaseback by the operator, according to a sales brochure from brokerage Colliers.

CAI Investments, founded in 2011 by Christopher Beavor, had more than $1 billion in assets under management in July 2022, according to its website, in key U.S. markets. In 2021, the firm bought a 1.5 million-square-foot former headquarters of Motorola in a Chicago suburb for an undisclosed price.

— Dana Bartholomew