RESTON, Virginia—2012 has been a busy hotel investment year for Wheelock Street Capital LLC, and the dealing might not be done yet.
In September alone, Wheelock acquired 15 hotels in two transactions for $221 million on 13 and 14 September. The hotels included in the transaction were a mix of full- and select-service properties and included the 257-room Hilton San Diego/Del Mar and 350-room Detroit Marriott Troy.
The deals come following the final closing in May of Wheelock’s $525-million Wheelock Street Real Estate Fund LP. The fund invests in a range of asset classes, including hotels, land, multifamily and others, according to Wheelock principal Patrick Campbell. The company had initially targeted a $500-million fund but increased the size to $525 million after the first closing in late 2011.
Earlier this year, Wheelock acquired the 242-room Marriott Pleasanton in Pleasanton, California, and the 380-room DoubleTree Suites by Hilton Houston by the Galleria. The transaction price for those two deals was not disclosed.
The 17 hotel properties acquired this year represent 3,101 rooms, Campbell said.
Wheelock, which was formed in 2008, has retained third-party managers for the properties.
While many of the assets acquired are located in the southern and western regions of the U.S., Campbell said Wheelock is searching for deals across the continental U.S.
Wheelock, which is co-headquartered in Boston and Greenwich, Connecticut, already has trumped the activity from its previous investment fund, in which 11 hotels were acquired between 2009 and 2011.
The company doesn’t have a specific number of hotel assets it is looking to acquire, Campbell said. “Each deal stands on its own,” he said by telephone from a satellite office in Reston, Virginia.
There is more than $300 million of investment capacity remaining in the company’s investment fund, he said, which will be spread across acquisitions in the multifamily space and land, he said. However, between 40% and 50% of the fund is comprised of hotel investments.
The fund could invest with joint-venture partners through a variety of capital structures and transaction types, including restructurings and recapitalizations in addition to acquisitions.
Challenging deal environment
Despite Wheelock’s recent activity, Campbell said there are challenges facing companies’ ability to transact. He said a bid-ask gap still remains between buyers and sellers.
“It’s not 2007 or 2006 when money was readily available and debt was freely available,” he said. “I think lenders are cautious. It’s harder to get debt. We’ve been fortunate to have many relationships to get (debt) deals done.”
Also, the quality of hotel product available on the market “varies,” Campbell said.
“It’s a difficult transactions environment right now,” he said.
Campbell said assuming supply stays low and if there are no macroeconomic shocks to the system, then the outlook for hotels looks positive.
“I think we’re in midcycle, and we have the benefit of not looking at a plethora of new supply,” he said.