SFO-adjacent Hilton Garden Inn trades above pre-pandemic price

A Hilton Garden Inn near San Francisco International Airport has sold for $75 million, fetching a 30 percent premium on its pre-pandemic price.

A pair of investors traded the 169-room Hilton Garden Inn San Francisco Airport North at 670 Gateway Blvd., in South San Francisco, the San Francisco Business Times reported. The price came out to $444,000 per key.

The seller was a joint venture between the publicly traded Summit Hotel Properties and Singapore’s sovereign wealth fund GIC. The buyer was an unknown investor that also acquired the hotel property corporate affiliate, San Fran JV 149 LLC.

The SFO-adjacent hotel deal, at a 30-percent higher key price than it sold for three years ago, suggests faith in the San Francisco area hotel market, which still trails the U.S. in volume of business travelers, according to the newspaper.

Summit, an Austin-based real estate investment trust, bought the Hilton Garden Inn in October 2019 from BRE Select Hotels Corp., an affiliate of Blackstone Real Estate, for $58 million. The price came out to $343,000 per key.

Hospitality leaders see the Hilton inn sale as a “net positive” for the San Francisco market, given its slump during the pandemic, especially for corporate- and airport-serving properties. The Bay Area tied with Oahu for the steepest decline in hotel occupancy since October 2019.

“It exemplifies the way in which buyers view the longer-term prospects for San Francisco,” Alan Reay, president and CEO of Atlas Hospitality, said. “Especially when we are seeing hotels in markets like New York selling at 50 percent discounts to previous sales.”

As a result of the sale, the Summit-GIC joint venture will forgo a comprehensive renovation planned for later this year expected to cost $7.1 million, or $42,000 per key, the REIT noted in its announcement.

The $73 million net proceeds on the deal — $37 million of which would go to Summit — will be used along with existing cash to repay its last remaining 2022 debt maturity of $62 million.

The GIC-Summit Hotels joint venture acquired the Hilton Garden Inn in a $249-million deal for four hotels, including two Residence Inn by Marriott properties in Portland and a 161-room Hilton Garden Inn in Milpitas.

The joint venture still owns the Milpitas property, which servesthe San Jose market, according to property records.

Since the onset of the pandemic in March 2020 the Summit has closed on or announced the acquisition of nearly $1 billion worth of hotel assets, including an $822 million deal for 27 hotels in Sun Belt markets from Texas REIT NewcrestImage, announced early this year.

Summit was among the REITs that remained stable during the coronavirus pandemic downtown.

[San Francisco Business Times] – Dana Bartholomew

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