Cupertino Hotel Sells Again

Jon Peterson

Boston-based AEW Capital Management has put the 224-room Cypress Hotel in Cupertino on the market after acquiring it roughly a year ago via deed in lieu of foreclosure.

The sale will test investor appetite for Bay Area properties in well-heeled suburban locations.

“There is no doubt that there is a great deal of capital willing to buy hotel assets in downtown San Francisco,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which specializes in California hotel sales. “We are not sure if the depth of this capital will flow down to the Peninsula.”

Hotels operating in the central Silicon Valley have seen occupancy rise to not quite 68 percent in the first half of this year, according to Smith Travel Research. That’s up from not quite 65 percent in all of 2010.

The San Jose, Campbell and Cupertino markets tracked by Smith have 78 hotels with just more than 9,500 rooms. The average daily room rate was just below $112 from January to June, compared to $105 in all of last year.

He expects the Cypress to sell for something between $55 million and $60 million, Reay said. That translates to a price per room from $245,000 to $267,000 and a capitalization rate in the range of 7 percent.

He expects the main bidders to be real estate investment trusts. REITs have been active buyers in San Francisco and Los Angeles, and their cost of capital is the cheapest in today’s market. Some properties also have been purchased by investment funds backed by pension-fund capital.

AEW paid $30.7 million to acquire a $40.7 mortgage loan against the Cypress in mid-2010. AEW did not return phone calls for comment. Eastdil Secured has the listing.

The property is located at 10050 De Anza Blvd., not far from the Apple Inc. headquarters.

West Coast Commercial Real Estate News