Summit Hotel Properties Sells Hilton in San Francisco for $75M

Summit Hotel Properties has sold the Hilton Garden Inn San Francisco Airport North for $75 million or $444,000 per key. The sale was completed through the firm’s joint venture with GIC.

Summit Hotel Properties and GIC acquired the 169-unit Hilton Garden Inn San Francisco Airport North in October 2019 for $58 million, resulting in a $20.5 million net gain and $73 million in net proceeds from the deal. Summit’s share of the proceeds is equal to $37 million, according to a statement from the company. As a result of the sale, the joint venture will not complete a renovation planned for later this year, saving an additional $7.1 million.

The deal has a cap rate of 1%, which is based on net operating income that includes a 4% FF&E reserve for the twelve months ending March 31, 2022. The company will use the proceeds to pay its only debt maturity in 2022.

In the years following the pandemic, the city has seen several major hotel deals. Among the most notable deals in the last year, Park Hotels & Resorts Inc. sold the 360-room Le Méridien San Francisco for $221.5 million or $615,000 per unit to KHP Capital Partners.  PK purchased Le Méridien via its acquisition of Chesapeake Lodging Trust during 2019. In fact, San Francisco had a total of six major hotel deals in the third quarter last year alone, including this deal.

This year, the momentum has continued. In the first quarter, Stonebridge Cos. sold the 230-room Hyatt Place San Francisco Downtown to Dynamic City Capital for $105.9 million or $460,000 per key. The deal was Dynamic’s first of the year, and the hotel was relatively new. It was built in 2019, and features 4,300 square feet of retail space, a lobby bar, and a 24/7 market. In addition to its proximity to Oracle Park, the property sits between the South of Market and Mission Bay neighborhoods. It has easy access to public transportation, including light rail and Caltrain.

Investors are bullish on the sector’s improving fundamentals. According to the 2022 hotel report from CBRE, ADR and RevPAR were stronger than expected at the end of the fourth quarter, and “below-average supply growth, strong domestic leisure trends, the resumption of inbound international travel and a predicted return to office later this year” will drive continued recovery of the hotel market in 2022.