MANHATTAN BEACH, CA-Investcorp has acquired the 176-room Residence Inn Manhattan Beach at 1700 N. Sepulveda Blvd. for $40 million and plans to renovate and upgrade the hotel. Investcorp has signed a new franchise agreement with Marriott for the property, which is a Marriott extended stay brand. Investcorp will renovate and upgrade the guest room interiors and the building exterior, including a new gatehouse, the company said in announcing the acquisition.

Investcorp did not name the seller of the hotel, but other sources said it was the Boston-based Rockpoint Group, which acquired the Residence Inn and other assets from Massachusetts Mutual earlier this year. The Residence Inn was one of eight hotels that Sunstone Hotel Investors, a REIT based in Aliso Viejo, CA, deeded back to Mass Mutual in November last year after deciding in 2009 that it would no longer pay the mortgages on those properties, according to public filings by Sunstone.

Herb Myers, a managing director in Investcorp’s real estate group, cited features that made the deal attractive for the company, including its location near the beach and with nearby corporate demand. “Despite the recent challenging environment, this property has consistently outperformed the market with extraordinary occupancy rates over the last four years,” Myers said. This is Investcorp's second acquisition of a Residence Inn flagged hotel. “We have had much success thus far with what we consider to be the extended stay hotel category leader,” Myers said.

Mortgage financing for the transaction was provided by Morgan Stanley. Interstate Hotels & Resorts, an existing Investcorp operating partner, will continue to provide management and operation services for the property.