Texas REIT Buys First San Francisco Hotel
By Jon Peterson
Austin, Texas-based Summit Hotel Properties has moved into the San Francisco hotel market for the first time with its $60.5 million acquisition of the 252-room Holiday Inn Express located on Fisherman’s Wharf in San Francisco.
The property was acquired for a joint venture, and Summit will hold an approximate 80 percent stake in the property. The remaining ownership is held by an affiliate of InterContinental Hotels Group. The Atlanta-based firm will manage the property under a long-term agreement.
The seller was a local private investment group.
“We are excited about the opportunity to enter the San Francisco market. We are also pleased that our relationship with IHG has provided us with the opportunity to source quality acquisitions like this, and we expect to continue our growth with them,” Dan Hansen, Summit president and chief executive, said in a prepared statement.
Thomas Callahan, co-president and chief executive officer west for PKF Consulting USA in the company’s regional office in San Francisco, said the city’s hoteliers are prospering en masse. “All the hotels in San Francisco are doing well. Some are achieving 80 percent occupancy, and others are at 85 percent occupancy. [Revenue per available room] for all of the hotels in San Francisco was up 13 percent in 2012 compared to 2011,” he said.
Part of the reason for the good performance is the lack of new supply. “There is only one new development that I’m aware of. It’s a Hampton Suites property on Mission Street,” he said. The property is located between 5th and 6th streets and will total 172 rooms.
The good run of the hotel market in San Francisco is not coming to an end anytime soon, either, Callahan said. “Barring some unforeseen event, we see that the hotel market in the region has another three to four years of strong performance to go.”
Summit expects the joint venture to invest an aggregate of approximately $3 million to improve the hotel. It will take the new owners 12 months to complete the work, according to the news release.
The property is approximately 15 years old, and according to industry sources, the average annual occupancy is in the range of 80 percent.
Summit expects the property to attract both leisure and business travelers because of its location. Guests are close to the corporate offices of Levi Strauss & Co. and Williams-Sonoma Inc. as well as near Fisherman’s Wharf and the souvenir shops and world-class seafood that the area is known for internationally.
Summit also owns hotels branded by Marriott, Hilton, Hyatt and Starwood. According to the company, its hotel portfolio consists of 87 properties totaling 9,635 rooms in 22 states.
Summit declined comment beyond a new release issued Feb. 13. A company spokesperson indicated that it would not release any additional information until the REIT filed its annual report at the end of February.
The seller retained CBRE Hotels in its San Francisco office to market the asset for sale. The listing agent was Senior Vice President Mark McDermott, who declined comment.
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