Colorado Real Estate Journal - March 4, 2015
Blackstone Real Estate has acquired a portfolio of extended-stay hotels in the Denver metro area from AB Real Estate Group and Sage Hospitality for $76.25 million, according to public records. The transaction included five TownePlace Suites by Marriott hotels spread throughout the metro area. Sage Hospitality will continue to manage the portfolio, which comprises 584 guest rooms. “ The portfolio checked all the right boxes for a sale in the current hotels market. For one, Denver is one of the strongest and fastest growing economic hubs in the country, drawing top-quality professionals and employers from all over the nation,” said Mark Fraioli, senior vice president in JLL’s Hotels & Hospitality Group. “Moreover, these particular hotels are located near some of the most robust demand generators in the market, such as hospitals, corporate office parks and the downtown core,” he said. In fact, four of the hotels are near hospitals, accommodating people coming to Denver for outpatient surgeries, out-oftown families of hospital inpatients as well as business and leisure travelers. “We are very proud of these five TownePlace properties and their performance leading up to this sale. We look forward to continuing their management contract and driving performance as excellent extendedstay options in Denver,” said Michael Everett, Sage Hospitality chief investment officer. The hotels and recorded sales prices were: • TownePlace Suites Denver Downtown, 685 Speer Blvd., 122 rooms, $23.94 million; • TownePlace Suites Boulder/Broomfield, 480 Flatiron Blvd., Broomfield, 150 rooms, $16.46 million; • TownePlace Suites Denver West/Federal Center, 800 Tabor St., Lakewood, 106 rooms, $13.74 million; • TownePlace Suites Denver Southeast, 112 rooms, 3699 S. Monaco Parkway, Denver, $13.08 million; and • TownePlace Suites Denver Tech Center, 7877 S. Chester St., Englewood, 94 rooms, $9.03 million. Fraioli, who is based in JLL’s San Francisco office, said institutional investors have been drawn to Denver’s hotel market – and similarly to markets in Portland and Seattle – over the last two years due to strong net in-migration, growth in high-wage jobs and hotel fundamentals. “The properties produce a high level of cash flow and therefore an attractive yield relative to other types of real estate,” he said. Historically, hotels also have carried a higher degree of risk, but that has been mitigated by increased professionalism in hotel management, with brands such as Marriott increasingly able to perform in both up and down cycles in the economy, said Fraioli. Institutional investors also tend to diversify geographically, and that also lessens their portfolio risk, he said. The TownePlace Suites hotels fall into two very desirable segments of the market: select service and extended stay. Select-service hotels have performed well because they don’t have amenities such as restaurants, bellhops and room service. “All those things are usually costs that create additional pressure on profit,” Fraioli said. “These hotels are very efficient because they are providing a very high-quality guest room and there are not a lot of additional services. They’ve been very profitable as a segment.” Also, extended-stay hotels, where an average of 40 to 50 percent of guests say three nights or longer, add another level of profitability. “Most costs associated with a guest stay (a request to change rooms, get a toothbrush, etc.) are experienced in the first day,” Fraioli said. Requests for maid service may be lesser, depending on the guest. The Denver hotels, he said, “were built and located with this extended-stay business model in mind, and that’s part of the reason they’ve been so successful,” he said. The hotels underwent a comprehensive renovation of guest rooms and public spaces in 2013. “They were very well managed by AB and Sage,” Fraioli added. Fraioli handled the transaction with JLL Managing Director Mark Fair and Chris Dewey, senior vice president.