A consortium of private investment groups affiliated with Walnut Creek, CA based Real Estate Investor and Developer Mark Hall have acquired 29 hotels and the corporate assets of Duluth, Minnesota based hotelier ZMC Hotels. ZMC Hotels is a third generation family business previously owned and operated by the prominent Goldfine Family of Duluth. Employing more than 1,000 people, ZMC Hotels owns and operates both private label boutique hotels, as well as those licensed by many prominent brands, including Hilton, Marriott, IHG, Wyndham, and others. Hotels are disbursed across the country from Duluth to Phoenix, AZ, to Florida, and many locations in between. Five hotels are clustered in Scottsdale, Arizona. All of the hotels, along with other select quality properties, will be master leased to and managed by Zenith Asset Company, an affiliate of Hall. Hall Equities Group and Zenith will be headquartered out of Walnut Creek, California, and Mark Hall is the CEO for both companies. Hall intends to retain certain senior ZMC Hotels management staff located in Duluth, Kansas City, and Scottsdale, but will consolidate accounting and construction functions to the Walnut Creek, CA headquarters.
Hall stated, “We are pleased our investor groups have the opportunity to acquire the ZMC operating platform, and all 29 of the company’s hotels, together with several sites for additional hotel expansion projects. We have had a few hotel investments over the last ten years, but with this acquisition, we will now be able to include hospitality product in our portfolio of investment opportunities in a more significant manner.” The combined portfolios of ZMC Hotels and Hall Equities Group now total nearly 10 million square feet of income property in 140 properties in 16 states. Hall Equities Group has investments in multi-family apartments, office buildings, retail centers, industrial space, self-storage, medical and life science real estate, residential subdivisions, and hospitality. It is expected that Zenith will take over management and operation of certain existing hotels controlled by Hall Equities Group. Following this, Zenith’s total hotel portfolio will then consist of some 4,000 rooms in 34 properties. Hall has plans for more than $40 million in immediate capital investment improvements and upgrades within the ZMC Hotel portfolio. In addition, Zenith also plans to build several new hotels. “We will employ the operational skills and experience of the ZMC team, together with our own homegrown development and construction management experience, to immediately focus on building five new hotels, including two in Scottsdale, AZ, one in the Puget Sound region, one in our hometown of Walnut Creek, CA, and one in Duluth, MN. Additional projects will be pursued in coming years,” stated Hall.
Equity financing for the transaction was derived from a variety of sources, including the sale of three quality properties by the Hall Equities Group sponsored investment groups, cash on hand, and the refinancing of two multi-family apartment buildings. The refinances were handled through Wells Fargo Bank, and JP Morgan/Chase. Hotel purchase money financing was provided by Bank of America. New hotel development projects going forward will have new standalone financing.
As part of the equity raise, one of Hall Equities’ investment groups sold a shopping center Hall originally developed and has owned since 2000. This super-regional center is known as Monte Vista Crossings and is located in Turlock, California. The buyer was San Diego based Excel Realty Trust (NYSE), which was just sold to giant fund manager Blackstone Group of New York. Monte Vista Crossings is one of the largest open-air regional shopping centers in the western United States, and is home to such national retailers as Home Depot, Target, Kohl’s, Lowe’s, Safeway, Dick’s Sporting Goods, Ross Dress for Less, Bed Bath & Beyond, T.J. Maxx, Old Navy, Office Max, Petco, In-Shape Fitness, Gap, Pier One Imports, and more than fifty additional well known shops and restaurants. Excel Realty Trust has retained Hall Equities Group to handle the on-going leasing and construction of the next phase of Monte Vista Crossings.
Another Hall Equities sponsored investment group sold a luxury apartment project presently under construction in downtown Walnut Creek, CA. This six-story, 100-unit Class “A” building of concrete construction is known as The Arroyo and is scheduled to be complete in fall of 2015. The project was sold to a major US-based Life Insurance Company, which has retained Hall Equities Group as both the General Contractor to complete construction of the project, and as the Property Manager for the project going forward.
Another Hall Equities sponsored investment group sold the 41,000 square foot 2890 North Main Street office building in Walnut Creek. This property had been owned by this investor group since 1992, and has long been home to a regional banking office for US Bank.
Proceeds from all three sales were used by the investor groups to generate equity capital for the hotel portfolio acquisition. Hall was represented in the transaction by the Law Offices of Jay Schnack on the sale transactions, and by Van Tengberg and Nir Margalit with the law firm of Foley and Lardner of Milwaukee, WI for the Portfolio Acquisition transaction. Mike Zylstra, Doug Schuster, Curt Allsop and Mark Sweeney of NGKF Capital Markets Team brokered the transaction.