San Jose – Three Bay Area hotels are part of a $3.8 billion coast-to-coast lodging deal that gives one hotel in the transaction, the Marriott in downtown San Jose, a value that exceeds $200 million.
Brookfield Real Estate Funds, a leading investment firm, has bought Watermark Lodging Trust for $3.8 billion.
The transaction gives Brookfield ownership of 25 hotel properties totaling 8,163 rooms.
Brookfield estimates that it paid an average of $481,300 per key — or room — for a hotel portfolio, which is about one-third resort hotels and two-thirds full-service hotels in an array of urban markets.
At that per-key price, the 510-room San Jose Marriott at 301 S. Market St. Downtown could be valued at $245 million.
OpenComps, which tracks the hotel investment market, estimated the San Jose Marriott could be worth closer to $237 million.
Either of the two scenarios would represent a steep jump from both the pre-purchase price for the hotel.
In 2013, CBRE paid $83 million for the hotel, which at the time had 506 rooms. In 2016, Watermark Lodging paid out $154 million. The 2016 price was 86% higher than the 2013 price. The expected price of the latest deal will be 54% higher than the 2016 amount.
“This transaction demonstrates how Brookfield expects a strong recovery and return of the corporate traveler to high-end hotels in the Bay Area and Silicon Valley,” said Alan Ray, president of Irvine-based Atlas Hospitality Group. area housing area.
Despite the prospects for improvement in the hotel sector, the housing market may still have to go through a lot of whirlpools.
Across the street from the San Jose Marriott, the Westin San Jose, formerly known as the Sainte Clair Hotel, was purchased in January at a price that was lower than what the hotel paid for in 2017.
302 S. The Westin San Jose in Market St. was purchased in January for $62.3 million, down 2.7% from its 2017 purchase price of $64 million. The purchase price includes the price paid for the land, building. , furniture and intangible value for property in the hotel.
The deal also included the 336-room Ritz-Carlton in San Francisco and the 226-room Fairmont Sonoma Mission & Spa resort in wine country.
The hotel business is back in resort areas like Wine Country and Big Sur, with hotels in those two high-end areas commanding record prices per room in many instances.
“Sonoma is already seeing record numbers post-COVID and will continue to do very well,” Ray said.
Both the companies said the transaction was due to be completed during the fourth quarter of October-to-December this year.
Brookfield officials believe the hotels they buy should prosper as the economy attempts to recover from the effects of the coronavirus pandemic, which ravaged the housing and travel industries.
“It’s hard to replicate hotels and resorts of this scale and quality,” said Lowell Baron, chief investment officer for Brookfield’s real estate group.
This is mainly due to the location of the 25 hotels, according to Brookfield.
“This portfolio is well positioned,” Barron said, “given its concentration in high-barrier-to-penetration coastal destinations, gateway cities, and the sunbelt.”