Hersha pays $71.1 million for downtown’s Courtyard by Marriott
from the San Diego Daily Transcript (Thursday May 3, 2013)
Robert Rauch, a local hotel developer and consultant, said the hotel will need both business and leisure travelers to succeed, but should get both.
As for rates, Rauch said he doesn’t believe Hersha will average more than $200 per night right out of the box, but that the REIT should go above that figure as the economy improves in the next three years.
Rauch said the hotel’s overall prospects look good.
“San Diego is a good market, Courtyard is a great brand, and the hotel is in a good but not a great location, since it isn’t located on the waterfront,” Rauch said.
As noted in a CoStar Group report on the sale, the property last sold to the Wheelock Capital Group entity for $40 million or $163,265 per room in May 2011. The hotel previously sold for $44.24 million or $180,592 per room in January 2005. This latest $71.1 million sale translates to a record high for the hotel at $290,204 per room.
When asked if this is too high a price, Rauch said that depends on the buyer. With this high price and long wait before recouping the investment, the property wouldn’t make sense for a private investor like himself. Given that a REIT has made the acquisition, it’s a different story, Rauch said.
“REITs only need a return that is in the high single digits,” he said. “They should get about an 8 percent annual return and the market has at least three good years ahead,” Rauch said.
