Here are three recent hotel transactions that took place around the country:
California
Dallas-based real estate investment trust Braemar Hotels & Resorts has entered into a definitive agreement to acquire the 138-room Mr. C Beverly Hills Hotel in Los Angeles. The company also is acquiring five luxury condominium residences adjacent to the hotel. The acquisition is expected to close around July 9, subject to customary closing conditions.
“The acquisition of the Mr. C is an opportunity for us to acquire an irreplaceable luxury property in a premier location in the heart of West Los Angeles,” said Richard J. Stockton, Braemar’s president and CEO. “This property fits perfectly with our strategy of owning high RevPAR luxury hotels and resorts and further diversifies our portfolio. We are excited to announce our first acquisition in the midst of the current industry recovery cycle. This is a complicated transaction that involves [operating partnership] units, warrants and mortgage debt. I’m proud of our entire team’s effort. Also, with Remington’s proven ability to maximize operating performance, we are excited about the future prospects for this renowned Los Angeles mainstay. Our prior corporate term loan had restrictive covenants that not only severely limited our capital expenditure program, prohibited property dispositions, and disallowed common dividends, but also would not have allowed us to complete this acquisition. By repaying that loan with the proceeds from our recent convertible notes offering, we have not only eliminated these constraints, but are now also able to pursue this acquisition.”
The Mr. C was built in 1965 and underwent a renovation in 2011. It has 138 guestrooms, including 22 suites. Public spaces include a full-service spa, three food-and-beverage outlets, more than 24,000 square feet of indoor/outdoor meeting space, an outdoor pool terrace, a fitness center and a business center. Additionally, the property includes five new-build fully furnished residences that are available for extended stays.
The total consideration for the acquisition is $77.9 million and consists of $65.4 million for the hotel ($474,000 per key) and an allocated price of $12.5 million for the five adjacent condominium units. The acquisition will be funded with approximately $30 million of cash (the majority of which will be used to pay down existing debt), 2.5 million OP units, 500,000 warrants at a strike price of $6.00, and a $30 million mortgage loan. The purchase price for the Mr. C represents, as of Dec. 31, 2019, a trailing 12-month capitalization rate of 5 percent on hotel net operating income of $3.9 million, according to the company’s preliminary estimates based on unaudited operating financial data provided by the sellers. The company expects to realize a stabilized yield of over 8 percent on its investment in the next three to five years. On a trailing 12-month basis as of Dec. 31, 2019, the property achieved revenue per available room of $251.14, with 75 percent occupancy and an average daily rate of $334.40, according to unaudited operating financial data provided by the sellers.
Georgia
Real estate investment firm Wheelock Street Capital has acquired the 167-room Perry Lane Hotel, a member of Marriott International’s Luxury Collection in Savannah, Ga. Purpose built in 2018, the hotel has two five-story towers with more than 9,000 square feet of event space, three fF&B outlets (along with a rooftop terrace and pool) and more than 1,200 works of art.
Hospitality management, development and investment company Sage Hospitality Group helped develop the property’s concept design, development and launch. Sage, which operates a portfolio of nearly 60 hotels and more then 30 F&B concepts, will continue to retain management responsibilities under Wheelock’s ownership.
“The acquisition marks Wheelock’s first hotel purchase in the Savannah market,” said Tim Hodes, principal and head of hotel acquisitions for Wheelock Street Capital. “The property’s institutional quality, A+ location within the Historic District and unique scaled development in a top leisure-driven market was a perfect match with our current acquisition criteria. The market and property continue to outperform our expectations and are both well ahead of the broader U.S. recovery curve.”
Hodges Ward Elliott arranged the sale of Perry Lane Savannah.
Delaware
Bethany Boardwalk Group and Bethany Beach Ocean Inn have sold the 112-room Bethany Beach Ocean Suites Residence Inn and the 100-room Holiday Inn Express in Bethany Beach, Del., to EOS Acquisitions.
The Bethany Beach Ocean Suites is affiliated with Residence Inn by Marriott. The oceanfront hotel includes a full-service spa and five meeting rooms. The Holiday Inn Express Bethany Beach, an IHG Hotels & Resorts hotel, has a 1,400-square-foot conference space and a business center.
Commercial real estate advisory firm Savills was the sole advisor in the transaction. The Savills team was led by hospitality capital markets experts Marc Magazine, executive managing director, and Tom Baker, corporate managing director. “The successful sale of these two irreplaceable assets is evidence of the extremely high barriers to entry that exist in Bethany Beach, particularly on the oceanfront,” Magazine said. “The buyer has secured control of the only hotel properties in town.”
“Bethany Beach is one of the most desirable beach communities on the East Coast,” Baker said. “This transaction is further evidence of the continued popularity of drive-to destinations despite the impact of COVID-19 on the travel sector.”