Hospitality Portfolio Trades for $225M With Eye on Conversion

Lockwood Development Partners has bought a portfolio of nine hospitality properties across eight states, amassing 1,550,000 square feet with a total value of approximately $225 million.

Lockwood plans to reposition the properties, which have struggled during the pandemic. After they are repositioned, the properties will feature a sustainable hotel operation, affordable multifamily housing and ghost kitchens. The properties will also serve as a resource for veterans to receive permanent housing, physical and mental assistance, and other support programs through SarahCare, an organization dedicated to providing resources for seniors.

The properties include Crowne Plaza, Memphis, Tennessee, (319 rooms) Crowne Plaza, Austin, Texas, (293 rooms), Clarion Hotel, Orlando International Airport (335 rooms), Crowne Plaza, Houston (243 rooms), Crowne Plaza, Dayton, Ohio, (283 rooms), Crowne Plaza, Reading, Pennsylvania, (259 rooms), Garden Plaza, Marietta, Georgia, (218 rooms), Former Marriott, Jackson, Mississippi, (303 rooms) and Crowne Plaza, Tulsa, Oklahoma, (286 rooms).

Marcus & Millichap brokered the sale

“With the majority of the assets located in diverse, metropolitan cities such as Austin, Houston, Memphis and Orlando, the properties’ versatility and accessibility will encourage economic growth and opportunities,” Eddy Nevarez, associate director of Marcus & Millichap’s National Hospitality Division and the exclusive agent for the buyer, said in a prepared statement. “These unprecedented times have challenged the creativity and proactiveness of our client, but this venture provides relief to that segment of the hospitality industry that has been decimated by the pandemic.”

Nevarez says that phase one of Lockwood Development Partners’ hotel repurposing initiative will serve as a benchmark for future large-scale portfolios. In the future, he says investors could convert struggling hospitality properties into multi-faceted assets that provide opportunities and resources for veterans as well as the community.

Marcus & Millichap’s brokers of record in Florida, Georgia, Mississippi, Ohio, Oklahoma, Pennsylvania, Tennessee, and Texas are, respectively, Ryan Nee, John Leonard, Mickey Davis, Michael Glass, Mark McCoy, Sean Beuche, Jody McKibben, and Timothy Speck.

Other firms are also taking on these repositioning projects, though the hospitality-to-apartment play seems to be most popular. For instance, developer Repvblik has already built a pipeline of redevelopment projects, including transforming a Days Inn hotel into a 341-unit affordable property in Branson, MO. The development is the largest affordable project to be developed without federal funding or tax credits.

Discounted distressed assets help make affordable deals—which are notoriously challenging—pencil. “A lot of these asset classes had PPP loans and other federal programs that allowed owners to kick the can down the road,” Richard Rubin, CEO of Repvblik, tells GlobeSt.com. “When it comes to a lot of these programs, they eventually run out of runway. For the properties that don’t have a discernible path forward, there is going to be a lot of lender-owned stock available. It is very clear to see what is happening, and I think a lot of the distress is going to be a bridge for the housing.”