Hotel Demand Up in Silicon Beach

MARINA DEL REY, CA—The tech center in Silicon Beach, which is home to tech giants like Google and Yahoo, is driving demand in the hotel space. Informed by this growing demand, Chatham Lodging, a hotel REIT, has purchased the 134-room Hilton Garden Inn in Marina del Rey for $44.5 million. RevPAR in Marina del Rey is currently up 17% year-to-date, and the REIT expects demand to remain strong well into the future.

“The Hilton Garden Inn Marina del Rey is situated in Silicon Beach in close proximity to the offices for Google, Microsoft, Yahoo, YouTube, Sony, Belkin and Facebook,” Dennis Craven, Chatham's COO and EVP, tells GlobeSt.com. “These businesses are driving lodging demand in western Los Angeles that we expect will remain strong for the foreseeable future.”

This was a complex acquisition, which included the assumption of a loan and a ground lease. The final sales price equates to $332,000 per room and an 8% cap rate. Like most of the properties purchased by the REIT, this was an off-market transaction. To finance the purchase, Chatham secured a $22.6 million loan at a 4.68% interest rate and funded the remaining balance with available cash and the company's credit facility.

Former ownership converted the property to Hilton in 2013, which involved a massive renovation. As a result, the hotel only needs minor brand-required improvements and no capital investment will be required until 2020. “The property will undergo minor work to some of the public spaces and rooms,” adds Craven about the renovations that the company will complete.

Chatham has purchased $190 million in in-fill, premium-branded hotels this year. This transaction increases the REIT's portfolio room count by 11%. “We are interested in upscale, extended-stay hotels and premium-branded, select-service hotels,” says Craven. “The Hilton Garden Inn Marina del Rey, with its various awards and recognitions, fits those descriptions perfectly.”