"Houston is a market we've wanted to try to get into for some period of time," John Belden, president and CEO of Memphis-based Davidson Hotel Co., tells GlobeSt.com. "We looked at multiple deals." The inroad came with the opportunity to reposition and re-brand the Hotel Sofitel at 425 N. Sam Houston Pkwy.
Davidson Hotel and the Carlyle Group of Washington, DC plan to invest another $12 million into upgrading and converting the asset to Crowne Plaza standards. Its new name will be the Crowne Plaza Houston North Greenspoint.
Belden says the appeal was its under-performance in an active submarket. "It didn't enjoy, from a competitive standpoint, the level of success we felt it could if it were to have extensive renovation, a stronger brand and greater distribution," Belden says.
Belden says the renovation will begin in late 2007. Its completion it penciled for April 2008. Renovations will include guest rooms, common areas and the exterior. Belden says he'd like to see the hotel run a strong premium to the market's $100 average daily room rate and 75% average occupancy.
With the current hot market in hotel properties, experts uninvolved with the transaction point out that the acquisition, especially in light of the proposed capital renovation, will provide a good return, especially over the long term. Lisa Hankamer, senior associate of CB Richard Ellis' hotel group, says the amount of capital chasing hotel investments had led to high prices and compressed cap rates in most major markets. When it comes to the Sofitel, she says "airport markets are good long-term investments in general."
Sperry Van Ness' managing director Greer Lee also sees the transaction as a good one for the joint venture due to the increase in room demand and a constrained supply because of new construction costs. "Prices per key for existing hotels will continue to increase as the economics of the hotel industry continue to improve," he says.
Davison and Carlyle have no other hotels under contract in Houston at this time. "We're looking at many potential projects in Texas, but none are that close that I'd want to say are definite," Belden adds.
The JV bought the Sofitel from Accor Worldwide of France. Its broker was Robert Wiemer, managing partner in Houston for the Miami-based Plasencia Group Inc.
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