Chinese Investors Buy Burlingame Hotel

By Jon Peterson

A Chinese investment group has acquired the 309-room Crowne Plaza San Francisco International Airport Hotel at 1177 Airport Blvd. in Burlingame, paying more than $29 million, or $95,000 a room, according to industry sources.

The 10-story property has 11 suites, an indoor swimming pool, a fitness center, a business center and nearly 12,000 square feet of meeting space. The property was developed in the early 1980s and has an average annual occupancy of approximately 80 percent. It is three miles south of the San Francisco International Airport.

The Carlyle Group, a Washington, D.C., opportunity fund real estate manager, was the seller.

The buyer is expected to invest an additional $8 million to improve the hotel’s public spaces and rooms, said Dan Evans, a senior vice president of operations for RIM Hospitality, a Newport Beach company managing the hotel on behalf of the owners. The work should take four months to six months to complete, he said.

“The main draw of the property will be the business traveler, given that it’s an airport hotel. We also should attract some social events like weddings on the weekends. We also will have a deal with San Francisco State University in hosting some of the school’s visiting sport teams they are competing against,” Evans said.

Burlingame, which is proximate to the San Francisco airport, has 13 major hotels with not quite 3,750 rooms, according to the city of Burlingame. The city relies on its transit occupancy tax, which is assessed on hotel rooms, as the largest single revenue source for its general fund.

In the city’s last fiscal year, revenue from room taxes grew to an estimated $15.5 million, up from $13.4 million the year before. The city projects a 2 percent increase in occupancy taxes to $15.8 million during the current 2012-2013 fiscal year, based on continued strong demand for hotel rooms but with limited expectations of an uptick in business from here.

Burlingame voters approved an increase in the TOT tax rate in 2009 to 12 percent from 10 percent.

Hotels also rank among the city’s largest property tax payers.

Carlyle hired CBRE Hotels to advise on the sale of the property. Senior vice presidents Mark McDermott and Henry Bose in CBRE’s San Francisco office worked on the sale.

Neither CBRE nor Carlyle responded to requests for comment.

Steve Becerra, a real estate broker for Cupertino-based Intero Real Estate Services, advised the buyers in the transaction. Becerra said he was bound by a confidentiality agreement and not at liberty to discuss the transaction. He said others were involved in helping the buyer, but he was prohibited from identifying them.

“I think that the price does fit in line with what most suburban hotels would be trading at in the Bay Area—typically around $100,000 per key. The downtown San Francisco market is where prices are much higher and where the price range would be $200,000 to $400,000 a room,” said Tom Callahan, co-president and chief executive officer of the West for PKF Consulting USA in San Francisco.

The San Francisco airport hotel market recorded a 17.5 percent increase in revenue per available room, or RevPAR, from July 2011 to July 2012, according to research from PKF.

Carlyle acquired the Crowne Plaza Burlingame as part of an 892-room four-property portfolio deal in July of 2007, according to its Web site. The other properties in the transaction were a 230-room Holiday Inn in northeast Sacramento, the 198-room Holiday Inn Concord and the 155-room Holiday Inn Walnut Creek.

Callahan said he did not believe that hotel operators and owners have seen the end of the sector’s recovery in this economic cycle. “Barring some sort of unforeseen event, the hotel market overall should have a good run through 2015,” he said.

Image courtesy of Expedia.

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