Orange County Business Journal
07/20/15

http://www.ocbj.com/news/2015/jul/20/oc-hotel-market-stays-hot-1262m-deal

The 485-room Irvine Marriott Hotel at the Irvine Towers office complex near John Wayne Airport has been sold to a Los Angeles-based institutional investor.

An investment affiliate of L.A.-based brokerage CBRE Group Inc. recently closed on the purchase of the 16-story hotel, which runs along the San Diego (405) Freeway at 18000 Von Karman Ave.

Terms of the deal were not disclosed by the buyer, although property records indicate a fund overseen by CBRE Global Investors paid about $126.2 million, or $260,000 a room, for the establishment.

The deal is the second priciest hotel sale reported in Orange County this year, trailing only January’s $360 million sale of the Montage Laguna Beach, which broke state records by selling for a little more than $1.4 million per room.

The per-room price paid for the Marriott is well behind that benchmark. But it still is about $100,000 per room more than the average sale price for California hotels valued at more than $5 million that were sold in 2014, according to data from Irvine-based hospitality consultant Atlas Hospitality Group.

CBRE Global Investors said this month that it had closed a new fund—called CBRE Strategic Partners U.S. Value 7 LP—that has equity commitments of more than $1.3 billion from 26 institutional investors in the U.S., Europe, the Middle East and Asia.

That fund, which bought the hotel, is expected to have total purchasing power of more than $3.3 billion, the investor said.

The money is being used to buy “high-quality office, multifamily and hotel assets,” according to a recent statement from the investor.

Marriott Fans

There are no plans for changes in management or hotel affiliations as a result of the sale of the Irvine Marriott, according to John Sauter, principal for CBRE Global Investors.

“We’re big fans of the Marriot brand,” Sauter said.

The Irvine Marriott—the second largest hotel in Irvine by room count—is the only Orange County asset that the $1.3 billion CBRE fund has acquired. State records indicate that the same fund was close to buying the Stadium Gateway office building in Anaheim earlier this year but didn’t complete the deal.

That six-story office, which is next to Angel Stadium, is now being acquired by Dallas-based Lincoln Property Co. (see related story, page 1).

“We’d like to buy an office or two” in OC, Sauter said.

An affiliate of Meristar Hospitality, which is part of New York-based hedge fund giant Blackstone Group LP, sold the Irvine Marriott, which has recently gotten large-scale renovations to its common areas and 27,000 square feet of meeting space in the past two years.

Additional upgrades are planned for the hotel’s rooms, pool area, and entrance, according to Sauter.

Last year the hotel completed a $5 million renovation of its lobby, lounge, and main restaurant areas into an open-air, comingled space that the hotel rebranded as the Floe Lounge.

Hotel officials said at the time that the upgrades helped give “a coastal urban vibe” to the Marriott, which is the only building in the Irvine Towers complex not owned by Newport Beach-based Irvine Company.

Irvine Co. owns and operates the 536-room Hotel Irvine—the city’s largest hotel by room count—on the opposite side of the 405 Freeway in the Jamboree Center office complex.

The Irvine Marriott purchase—which property records show closed near the end of June—adds to a brisk pace for hotel investments in OC so far this year, particularly for larger properties, according to data from Atlas Hospitality.

The nine largest hotel deals in OC to close so far this year have traded hands for more than $730 million combined, with other large deals taking place in Huntington Beach, Tustin, Orange and Anaheim.

There were 30 hotel sales reported in OC in 2014, for a total of $815 million. There were 14 sales here in 2013, for $131 million, according to Atlas’ data.

Low interest rates; an influx of funds from private equity, real estate investment trusts, and overseas investors; and added interest in full-service hotels are driving the surge in sales, said Alan Reay, president of Atlas Hospitality.