By Jon Peterson
Chowchilla, Calif.-based Sky Hotels has closed on the acquisition of the 89-room Holiday Inn Express in Lodi. The final purchase price was $15.35 million, or $172,471 per door, according to sources familiar with the sale of the property. The property had been placed up for sale earlier this year with an asking price of $16 million, as written in the property’s offering document.
The previous owner of the property was MLK Fund Investments, a local developer known for its activity in the Lodi/Stockton region. Both the buyer and seller were represented in the transaction by the Irvine, Calif.-based Atlas Hospitality Group. The two people working on the sale was Justin Myers, vice president, and Oliver Shah, executive vice president.
“We did receive very strong interest in the property. This investor interest reflects how [the] capital sources view the Central Valley hotel sector, which has responded better than some other parts of the state such as the San Francisco Bay Area,” says Meyers.
The Holiday Inn sale produced a cap rate of 8.4 percent, according to industry sources familiar with the sale. This return is based on the income coming out of the property at the end of 2019.
The asset sold has been a very strong performer – the current average annual occupancy is 70 percent. “There are a couple of reasons for this performance. One is that the property has attracted a wide range of businesses that have filled up rooms during the week. These would include construction workers, contractors and municipal employees. Rooms on the weekends have been occupied by tourists that have been attracted by the region’s wineries,” said Myers.
The Holiday Inn property was first developed in 2009. It was originally constructed as an all-suite product. It was then later changed to a Holiday Inn Express asset. This means it has larger sized rooms than you would normally see in a Holiday Inn Express property. The rooms in the Lodi property range in size from 400 to at least 800 square feet. The asset had gone through a major renovation during the years of 2019 and 2020.
The property covers a total of two acres, and the hotel is comprised of a single, three-story structure.