Another Asian investor acquiring U.S. hotels
Transactions - OCTOBER 8, 2019

Another Asian investor acquiring U.S. hotels

by Andrea Zander

Summit Hotel Properties has entered a definitive agreement to acquire four West Coast hotels for $249 million through its recently formed joint venture with GIC. The 710-room portfolio consists of two Residence Inn by Marriott hotels and two Hilton Garden Inns.

The joint venture plans to invest approximately $23 million of capital in the four hotels during the first three years of ownership. The pending transaction is expected to close in the fourth quarter 2019.

The 258-room Residence Inn by Marriott Portland Downtown/RiverPlace is located in Portland, Ore., near several demand generators, including Portland State University, Oregon Health & Science University, the Oregon Convention Center and more than 28 million square feet of office space.

The 122-room Residence Inn by Marriott Portland Hillsboro also is situated near major demand generators in Hillsboro, Ore. Intel, Oregon’s largest private employer, recently announced a 1.5 million-square-foot campus extension that would increase its workforce in the area by nearly 10 percent. Nike’s global headquarters, also located in the market, just finished a 3.2 million-square-foot expansion this year.

In South San Francisco, Calif., the 169-room Hilton Garden Inn San Francisco Airport North is situated near numerous biotech companies, including the world headquarters for Genentech. Summit Hotel Properties anticipates the depth or demand will increase because more than 7 million square feet of office and mixed-use projects and more than 2,600 residential units are in development in South San Francisco.

At the southern tip of the San Francisco Bay, the 161-room Hilton Garden Inn San Jose/Milpitas, is situated in Milpitas, Calif., near companies such as Cisco Systems, KLA-Tencor, Western Digital, Micron and Cadence Design Systems. A transit-oriented village is under development nearby that will include 7,100 housing units and 1.3 million square feet of commercial, retail, restaurant and entertainment space.

The deal comes after Seoul–based Mirae Asset Financial Group acquired a 15-hotel portfolio in the United States from Anbang Insurance Group Co. for $5.8 billion, marking the single-highest price tag for an overseas alternative investment by a South Korean company.

The global hotel construction pipeline, led by the United States, is at a record high, according to Lodging Econometrics, with 14,051 projects (2.3 million rooms) under construction, getting ready to start construction in the next year or in the early planning stages. This represents 9 percent more hotel projects and 8 percent more hotel rooms in the pipeline since the same time last year.

New York City (166 projects), Dallas (162 projects), Los Angeles (158 projects) and Houston (146 projects) grabbed the largest share of the hotel project pipeline.

Internationally, 6,565 projects are under construction; 4,392 are scheduled to start in the next 12 months; and 3,094 are in the planning phase. The United States makes up 40 percent of the global pipeline, with 5,656 projects in the works.

Globally, four hotel companies made up more than half of construction activity — Marriott International, Hilton Worldwide, InterContinental Hotels Group (IHG) and AccorHotels. IHG's Holiday Inn Express, Hampton by Hilton, Marriott's Fairfield Inn and AccorHotels' Ibis Brands were the leading hotel brands in the pipeline.

In the United States, modular construction has helped owners keep pace with demand. Currently, Marriott is building what the company claims will be the tallest modular hotel in the world. The $65 million, 360-foot AC Hotel New York, with its 168 modular hotel rooms, is scheduled for final on-site assembly late this year and will open in late 2020.

Overall tourism in the United States is declining steadily, however. The worrying outlook for international inbound travel is consistent with U.S. Travel’s forecast, which projects the United States’ share of the global long-haul travel market will fall from its current 11.7 percent to below 10.9 percent by 2022, despite a projected annual increase in the volume of inbound visitors to the United States.

“The solid performance of the domestic leisure and business segments, which together account for 86 percent of the travel economy in the United States, have kept the travel expansion on track through the first seven months of 2019 and have acted as a bulwark against the stagnant state of international inbound travel,” said David Huether, U.S. travel senior vice president of research.

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