More DC Hotels Go On The Block

WASHINGTON, DC-Speculation that the hotel cycle is nearing its peak is causing some hotel owners and REITs to sell off assets in order to capitalize on the record per key prices that many properties are realizing. “The smartest people I know in this industry are starting to sell,” Cameron Larkin, SVP of Hospitality Financing & Business Development, at the Texas-based First American Realty Associates LLC tells GlobeSt.com.

This particular cycle has lasted longer than usual because no supply entered the market after 9-11 for several years, he explains. However new supply is starting to enter the market and is expected to have an affect on existing assets. “Now is the perfect time to sell because pricing is still strong and the cost of debt financing for hotels is still low.”

“In the Washington, DC area, for example, we recently got a request to look at a four-hotel portfolio for financing.” Larkin says that the owner was looking at a cap rate in the low 7s. “I don’t know what a new owner can do to the property to achieve a reasonable return,” he says.

Whatever the rationale, anecdotally it seems as though more hotels and hotel companies are being traded. The most recent example is the Bethesda, MD-based Host Hotels & Resorts, which has sold seven assets since the beginning of the year for an approximate aggregate price of $333 million. By the end of the year, the company expects to have sold up to $500 million in assets, a spokesman tells GlobeSt.com. According to him, these sales are part of Host Hotels’ regular program of cycling capital through its portfolio.

Two of the recent sales were in the DC area: Fairview Park Marriott in Falls Church, VA, a 388-key property located at 3111 Fairview Park Dr., and the Capitol Hill Suites, a 152-unit property at 200 C St. SE. The buyers were undisclosed.

The Fairview Park Marriott was part of a group of three hotels that closed at the end of February. The other two properties were Raleigh Marriott Crabtree Valley in Raleigh, NC and the Miami Airport Marriott in Miami. The trio sold for approximately $214 million, from which the company will record a gain of approximately $118 million in the first quarter.

It is impossible to tell how these hotels were valued, Vikram Antin, an associate in Marcus & Millichap REIBC’s National Hospitality Group, tells GlobeSt.com. But he notes that the county assessed the Fairview at $70 million. “I would imagine it traded for $80 million to $85 million,” he says.

In January, the company sold the Sheraton Milwaukee Brookfield Hotel, the Sheraton Providence Airport Hotel, the Capitol Hill Suites and the Marriott Mountain Shadows Resort & Golf Club for approximately $119 million.

Other recent trades in the DC area include Boston-based Pyramid Advisors sale of the Sheraton College Park in Beltsville, MD and Bethesda, MD-based RLJ Development LLC’s sale of a 950-key portfolio with assets in Washington, DC, Baltimore, Chicago and Providence, RI.