SAN JOSE, CALIF. — Carey Watermark Investors 2 Inc. (CWI 2), a non-traded lodging REIT, has acquired the San Jose Marriott for $154 million. The recently renovated hotel includes 510 guestrooms and is located in downtown San Jose, one of Silicon Valley’s strongest lodging markets. CWI 2 financed the acquisition using $88 million of senior debt.
Built in 2004, the San Jose Marriott features 23,000 square feet of meeting and event space, three food and beverage outlets, a concierge lounge, business center, fitness center and an outdoor swimming pool.
“Given the limited supply of institutional-quality assets in the Silicon Valley market, the San Jose Marriott represented a unique investment opportunity,” says Michael Medzigian, CEO of CWI 2. “The property is the newest hotel in downtown San Jose and the acquisition adds a top-performing, well-located asset in a high growth market with high barriers to entry to CWI 2’s portfolio.”
The hotel is connected to the newly renovated and expanded San Jose McEnery Convention Center and is in close proximity to San Jose State University and attractions such as the Tech Museum of Innovation, the San Jose Museum of Modern Art and the SAP Center, home of the NHL’s San Jose Sharks. The hotel is also located three miles from the San Jose Mineta International Airport.
Over the past few years, the previous owner invested $10 million in capital improvements, including a soft goods renovation of the guestrooms and corridors, the addition of four guestrooms and a complete renovation of the lobby, as well as updates to the public space and concierge lounge.
CWI plans to invest $5.8 million in planned capital expenditures and other acquisition-related costs. The hotel will continue to be managed by Marriott International.
The San Jose lodging market is performing well, according to CWI 2. In terms of revenue per available room (RevPAR), the market posted a compound average growth rate of 15.6 percent from 2011 through 2015.
With over 109 million square feet of office space in Silicon Valley, 29 million square feet in the greater San Jose area and 14 million square feet in downtown San Jose, the San Jose Marriott benefits from significant corporate demand. Silicon Valley has an additional 17 million square feet of office development proposed or currently under construction, so CWI 2 anticipates the region to experience a rising need for lodging.
New York-based Carey Watermark Investors 2 was formed to make investments primarily in the lodging and lodging-related sectors. Affiliates of W. P. Carey Inc. and Watermark Capital Partners advise the REIT and manage its overall portfolio. Since the beginning of the year, CWI 2 has purchased the Seattle Marriott Bellevue in Washington and the Le Meridien Arlington in Virginia.
— John Nelson