Hanover Marriott sold for 27M, will get 20M upgrade

//August 24, 2009

Hanover Marriott sold for 27M, will get 20M upgrade

//August 24, 2009

HEI Hotels & Resorts plans between $1 billion and $1.5 billion in acquistions in the coming years.The Hanover Marriott, an upscale hotel on Route 10 in the Whippany section of the township, has been sold for $27 million to HEI Hotels & Resorts, which will invest $20 million to fully renovate all public and private spaces of the 353-room hotel.

“We believe this demonstrates the loosening of the hotel acquisition market,” said Roger Clark, HEI senior vice president for acquisitions and development, in a statement. “With approximately $500 million of equity in our fully discretionary fund, we intend to be in the vanguard of this wave, surfacing deals that make sense for our investment plans.”

HEI plans to “acquire between $1 billion and $1.5 billion in hotels and resorts in the coming years,” Clark added.

The $27 million price tag makes this the largest hotel deal in New Jersey this year, said Dan Fasulo, head of research for Real Capital Analytics, in New York. Fasulo said he’s not counting casino/hotel acquisitions in Atlantic City, since such properties generally are analyzed as casinos, not hotels.

When it comes to the U.S. hotel business, this year, “there has been little to no transaction activity anywhere,” Fasulo said. “Investors are having a hard time getting their hands around the fundamentals, which have fallen off a cliff since last October — it’s very hard to value these assets.”

Industry experts say commercial real estate properties are selling for 30 percent to 50 percent less than they would have brought several years ago, during the nation’s real estate boom.

The Hanover Marriott serves Morris County’s business community, and the pharmaceutical industry in particular, “which has visiting employees, doctors and scientists” seeking hotel rooms, Fasulo said.

Eric Lewis, managing director for the hospitality and gaming group at the real estate brokerage Cushman & Wakefield, declined to comment on the Hanover Marriott sale, but said, “this market is expected to continue to provide excellent opportunities for acquisitions for well-positioned purchasers.”

In a statement, HEI said the planned $20 million renovation equates to an investment of nearly $57,000 per room. HEI said the entrance area will be transformed into Marriott’s new “Great Room” concept, designed for the 24/7 work patterns of business travelers. The concept breaks the hotel public space into separate areas for work and socializing in group and individual spaces.

“This marks the first acquisition of our third investment fund, the $515 million HEI Hospitality Fund III L.P., which was raised in early 2008,” said Steve Mendell, executive vice president of acquisitions for HEI. “The Hanover Marriott fits perfectly into our portfolio ‘sweet spot,’ and is representative of the type of assets we are targeting for Fund III.”

Based in Norwalk, Conn., HEI Hotels & Resorts is a hospitality investment firm that acquires, develops, owns and operates full-service, upper upscale and luxury hotels and resorts throughout the United States under such names as Marriott, Sheraton, Westin, Le Meridien, Embassy Suites and Hilton.

E-mail Beth Fitzgerald at [email protected]