By Jon Peterson
Dallas-based Ashford Hospitality Trust has expanded its hotel acquisitions in the San Francisco Bay Area with its purchase of the 357-room Fremont Marriott Silicon Valley hotel in Fremont. The purchase price was $50 million or $140,000 per room, which represents around 45 percent below replacement cost.
“We believe that the real estate hotel fundamentals are very strong in the Bay Area and on the West Coast in particular. The demand for the existing product is good and there is limited amount of new supply being added to the region. This makes for a compelling investment opportunity,” says Deric Eubanks, chief financial officer for Ashford Hospitality.
Ashford Hospitality sees that another benefit to the transaction was the ability to bring in a new management company to the property. “The new management company will be Dallas-based Remington Lodging. We are very confident in their ability to affect the bottom line of the property going forward in a positive way,” said Eubanks.
The acquisition price on the property was a mixture of $12.5 million of equity and $37.5 million of debt. The financing on the sale was arranged by New York City-based Cushman & Wakefield Global Hospitality on behalf of a money center bank. The loan has a floating interest rate of LIBOR + 4.20 percent, with no LIBOR Floor.
Cushman & Wakefield also was involved in the sale of the hotel on behalf of AIG. The brokers in both parts of the deal were Daniel MacDonnell, James Escarzega and Steve Michels.
The transaction produced an 8.1 percent cap rate based on the projected net operating income of the property for the next 12 months. The property now has a RevPAR of $105.68 and an ADR of $139.80.
The current occupancy of the hotel is 75.6 percent. “This occupancy level puts in higher than the overall sub-market and shows how well the property has been performing,” said Eubanks. The Fremont/Newark submarket has seen very strong RevPAR growth over the past 12 months. This has been to the tune of 16.6 percent over the past 12 months through June of this year.
The acquisition of the Fremont Marriott represents the sixth property that Ashford Hospitality owns in the greater San Francisco Bay Area. “The other assets we own in the region are the Embassy Suites Santa Clara and Walnut Creek, Courtyard by Marriott in Oakland and Newark and the Residence Inn in Newark,” said Eubanks. On a nationwide basis, the company owns a 114-property hotel portfolio.