Wheelock Buys First Bay Area Hotel

By Jon Peterson

Greenwich, Conn., -based Wheelock Street Capital, a real estate private equity firm, has purchased the 242-room Pleasanton Marriott Hotel at 11950 Dublin Canyon Road for an undisclosed price. It is Wheelock’s first San Francisco Bay Area hotel investment; the company owns three hotels in Southern California.

The Pleasanton hotel has operated as a Marriott since 2008, following a $17.1 million renovation. It includes more than 4,000 square feet of meeting space and is a full-service hotel.

Wheelock has been drawn to the Northern California market by the job growth, which its principals believe should lead to more business for the hotel. The East Bay is home to numerous corporate headquarters, including U.S. and Canadian grocer Safeway Inc.; The Clorox Co., a consumer products maker and manufacturer with 8,100 employees worldwide; and Kaiser Permanente, a non-profit health plan with more than three million Northern California members.

Wheelock bought the hotel for its commingled fund, Wheelock Street Real Estate Fund. The company concluded its capital raise July 3for the fund, securing total equity of $525 million. One of its larger investors is the New Jersey Division of Investment, which has committed $150 million. The sum is divided into two segments, with $100 million going directly into the commingled fund and the remaining capital being reserved for co-investment alongside future deals for the fund.

“We were fortunate to have gained momentum at the outset of the raise due to support from key lead investors,” Rick Kleeman, a Wheelock co-founder and managing partner, said in a prepared statement released at that time. “We believe that at this level of capital commitments, the fund is well-positioned to capitalize on current market opportunities while maintaining a high level of selectivity and focus,” Co-founder and Managing Partner Jonathan Paul said in the same news release.

Wheelock invested $20 million of its own capital in the fund, according to a document from New Jersey. The limited partners in the fund are expected to attain a 9 percent preferred return on their contributed capital.

Wheelock marketed the opportunity fund as a vehicle to create a diversified portfolio with multiple property types. Both hotels and residential land investment platforms are to be included. The deals are expected to involve individual assets, portfolios, operating companies and securities and to use a variety of capital structures, including high-yield debt and preferred equity.

The commingled fund has a nationwide strategy with the capability to invest up to 10 percent of the portfolio outside of the United States. The commingled fund’s investment period ends July 3, 2015, or the day that all investors’ financial commitments have been reserved or allocated to a particular purchase, whichever date is earlier.

The fund is the first commingled financial instrument for Wheelock though the company has been investing in real estate since 2008 with backing from two capital sources: The Baupost Group LLC, a $23 billion Boston-based hedge fund, and the University of Texas Investment Management Co., an external investment company that oversees investments for the University of Texas and Texas A&M systems. It has $27 billion in assets under management.

Jonathan Paul, who worked for The Rockpoint Group starting in 2003 and Westbrook Partners from 1994 to 2003, has extensive experience investing in opportunistic, or high-risk and high-return, real estate.

Image courtesy of: http://www.marriott.com/hotels/hotel-information/travel/oakmc-pleasanton-marriott/

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