Rockbridge Invests $13.9MM Into Hotel Development in San Jose

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AC Hotel

By Jon Peterson

Columbus, Ohio-based Rockbridge Capital has made a $13.9 million equity commitment into the development of the 210-room AC Hotel in San Jose, according to a document received from the Ohio Bureau of Workers Compensation Board.

A company spokesperson for Rockbridge stated that there have been pre-development issues with the project, which has delayed the start of construction. It is not clear as to when the actual start of the project will be happening. There was a projected opening of the property in spring of next year.

The project is located at the Corner of West Santa Clara Street and Highway 87. This development is being done in a joint venture with Rockbridge and Cranston, Rhode Island-based TPG Hospitality. Rockbridge is the main equity source for the project and TPG is overseeing more of the day-to-day operation of the property.

The AC Hotel in San Jose will be one of the first of its kind in California and among the first built in the United States. It’s a Marriott designed product, however this type of hotel is geared for the modern traveler looking for a new way to experience the city. The property in San Jose will include bar and lounge with signature cocktails, 900-square foot fitness center, open air swimming pool and courtyard and two high-tech breakout rooms.

Growth plans for the AC Hotel brand is to include more than 50 additional properties set to open within the next three years throughout the United States and Latin America. It has a strong international presence with properties in Spain, Italy, Portugal and France.

Rockbridge made its investment in the property in San Jose for its commingled fund, the Rockbridge Hospitality Fund VI. This commingled fund was started in May of 2013 with a total equity raise of $438 million. The Ohio Bureau of Workers Compensation made a $50 million commitment to the commingled fund in June 2014. The preferred return for the investors in the commingled fund is 9 percent.

Fund VI is considered a value-add commingled fund. It has an investment period that expires at the end of October in 2017. The investment fund places capital into commercial real estate properties with a particular focus on the hospitality sector. The structure of its investments can include making both debt and equity investments in properties.

Through the end of 2014, Fund VI had made a total of 13 investments. All of the assets in the fund up to now have been in hotels. Around 23 percent of the portfolio was located in the West region. The other investments were located in the East, Midwest and South regions of the country. The portfolio has a loan-to-value ratio of 63.32 percent.

TPG Hospitality is a major hotel management company. It has a hotel operating portfolio of more than 60 hotels representing 20,000 guest rooms in 26 states. The project in San Jose will be the company’s first in the San Francisco Bay Area. According to its Web site, the firm’s only two California assets that it manages are the 207-room Holiday Inn Fresno and the 253-room DoubleTree Suites by Hilton Santa Monica.

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