An affiliate of Blackstone Real Estate has picked up two business hotels in Sunnyvale for $99 million.
The New York-based investment giant acquired a 145-room Courtyard Marriott and a 94-room TownePlace Suites as part of a seven-hotel deal with Hersha Hospitality Trust, the San Francisco Business Times reported.
The Blackstone affiliate paid $69.1 million for the Courtyard Marriott at 600 West El Camino Real, or about $477,000 per room. In 2016, Hersha bought the hotel for $75 million, or $517,000 per room.
Blackstone bought the TownePlace Suites at 606 South Bernardo Avenue for $29.9 million, or $318,000 per room. Hersha bought the hotel for $27.7 million, or $295,000 per room, in 2015.
The acquisitions stemmed from an April deal that Hersha would sell seven of its urban hotels to Blackstone for $505 million. For the Pennsylvania-based real estate investment trust, it meant a change in strategy.
“We’re really focusing our energies more on luxury and lifestyle resort assets,” Hersha CFO Ashish Parikh told the Business Times. “It wasn’t about the market — we like the Bay Area a lot — but rather the type of asset.”
Hersha’s last Northern California hotel is the 60-room Sanctuary Beach Resort in Marina, north of Monterey.
The Courtyard Marriott opened in 2014 and caters mainly to business travelers drawn to its more than half-dozen meeting rooms, outdoor pool and gym, and proximity to Google and Apple headquarters. An entity of Blackstone applied for a new liquor license.
The Courtyard deal is complicated by negotiations around debt obligations Blackstone would assume for a commercial mortgage-backed security loan secured by the hotel.
Parikh estimated it might take the Courtyard Sunnyvale “another year or two” to recover its pre-pandemic business.
Some markets, such as San Francisco and Chicago, give him pause.He said large corporate hotels there risk becoming “obsolete” when faced with unfavorable labor agreements and the challenge of filling up to 1,000 hotel rooms and meeting spaces such as ballrooms.
“I think those may be the ones that never come back,” Parikh said. “If I was going to avoid a segment of the industry, it would be big-box, urban hotels.”
In July, an affiliate controlled by Blackstone sold four Motel 6 properties in San Jose, Santa Clara, Gilroy and Campbell to separate buyers for $40.3 million.
— Dana Bartholomew
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