NEW ORLEANS-A positive outlook for the local hotel market coupled with an asset’s great location proved to be the ideal combination for Carey Watermark Investors. The New York City-based REIT formed a $45.7-million joint venture with HRI Properties for a healthy stake in the 251-room Chateau Bourbon Hotel, with plans to spend $18 million on renovating and repositioning the asset as the first Hyatt hotel in the French Quarter.
The deal also includes 20,000 square feet of retail, which is close to being 100% leased, and a 300-stall parking garage. CWI CEO Michael Medzigian tells Globest.com that one main reason for acquiring the stake involves entry into a market that is seeing some terrific growth. The New Orleans hotel market has gotten quite strong and, as such, has “become a target market of a lot of hotel investors,” Medzingian explains. The RevPar growth during the past year is one of the strongest in the country; with the 2012-2013 convention calendar filling up quickly, he adds.
In terms of location, the hotel is at 800 Iberville St. “We’re in the French Quarter, on Bourbon Street,” Medzigian notes. “We’re also on the corner of Canal Street, on the fringe of the French Quarter, which makes it easier for vehicular access than those of other hotels in the Quarter.”
Other factors, including low replacement costs, were also drivers of this deal. Then there is the building itself.
“This is a unique asset, with some of the largest guest rooms in the city. All the rooms have 12-foot ceilings,” Medzigan says. There is also the fact that, when renovation is completed in early 2012, the Chateau Bourbon will be renamed the Hyatt French Quarter Hotel – the only Hyatt-branded property in the French Quarter.
An affiliate of HRI will continue to manage the property. Medzigian says the partnership has been a great one for CWI and the REIT is in discussion with HRI on other similar partnerships.
The Chateau Bourbon transaction is the REIT’s second, and Medzigian acknowledges he’s on the lookout for investments. He notes the REIT’s philosophy is more opportunistic rather than the need to have a presence in a certain city or region.
“While we’ll buy 100% of an asset, our strategy also involves providing joint venture capital as we did in this case,” Medzigian says. “When you’re buying real estate, location and price are the drivers. But when involved in a joint venture, it’s more about the partner, structure of the partnership, then the location and price.”
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