Nine figures and counting

The sale of the Tampa Hilton for $101 million earlier this month highlights the burgeoning interest by institutional capital in top-level Gulf Coast lodging properties, the result of improved occupancy and revenue, analysts say.

CrossHarbor Capital Partners' acquisition of the 520-room downtown hotel marks just the fourth time in Tampa history that a hospitality asset has fetched nine figures in a sale.

Just as significantly, each of the $100 million-plus transactions occurred within the past two years, a sign that the region is commanding greater respect on national and international stages even as some markets appear to have peaked in regards to values.

“The Tampa Bay area is performing at a very high level and it's continuing to grow,” says Daniel C. Peek, the Holliday Fenoglio Fowler L.P. senior managing director and head of the firm's hospitality practice group who led a team in representing sellers Driftwood Hospitality Management and H.I.G. Realty Partners in the sale.

“Areas like Miami and New York are also doing well but they seem to have plateaued, while the Tampa Bay area continues to excel,” Peek adds. “It had twice the growth in the level of revenue per available room compared to the nation last year, leading all major markets in the U.S.”

Lou Plasencia, head of Tampa-based The Plasencia Group, a hotel brokerage and consulting firm, also credits a series of internal and external factors in the sale. Internally, he notes Driftwood and H.I.G. invested in excess of $10 million to upgrade the Hilton and convert it from a Hyatt hotel in 2013, a year after buying the 211 N. Tampa St. property for roughly $63 million.

“H.I.G. and Driftwood did a magnificent job of repositioning that property to make it one of the best hotels downtown, and the general manager there is one of the best operators I've ever met,” Plasencia says.

A plethora of amenities have added value, as well. In addition to its rooms, the Tampa Hilton also contains a trio of restaurants and coffee shops, 30,000 square feet of meeting and ballroom space, an upscale fitness center and a rooftop heated outdoor swimming pool and sun deck.

But Boston-based CrossHarbor's deal for the 18-story hotel, which was completed on 5.6 acres downtown in 1982, will also likely benefit from Strategic Property Partners' plans for $2 billion worth of improvements in Channelside — even though the partnership between Tampa Bay Lightning owner Jeff Vinik and Cascade Investments intends to add as many as 500 new hotel rooms as part of its development, Peek says.

“Downtown's reurbanization has made Tampa a more attractive area both to work in and visit,” Peek says. “Those dynamics draw institutional investors. I also don't think one can overstate the importance of what Jeff Vinik and Cascade's vision for Channelside is having.”

Analysts also predict CrossHarbor, a firm founded in 1993 that has invested more than $12 billion, won't be the last institutional player to enter the Gulf Coast market seeking trophy properties as a result of growing demand and limited supply.

“I think we're definitely going to see a different level of pricing in the region than we have in the past,” says Kent Schwarz, an executive vice president with commercial brokerage firm Colliers International Tampa Bay.

“After all, no one is going to be able to build the hotels that have been achieving those prices for anything less than $200,000 per key,” he adds. “And these prices are being driven by net operating income and what level of performance an investor thinks they'll have going forward. Investors have a lot of confidence in the future of this market.”

It remains to be seen, however, whether nine-figure pricing will remain focused on downtown hotels or those in close proximity to area beaches.

Two of the four $100 million-plus sales — the Tampa Hilton and the Tampa Waterside Marriott Hotel & Marina, which Vinik acquired for $150 million in October 2014 — have involved downtown properties.

The other two — the $134 million sale of the Hilton Clearwater Beach and the $120.5 million deal for the Hyatt Regency Clearwater Beach — were hotels on or near beaches.

Of the four, the 250-room Hyatt Clearwater achieved the greatest value on a per-key basis, at $482,000 per key, an industry measurement. By comparison, the Tampa Hilton sold for $194,230 per key.

“I think you'll continue to see very strong pricing, based in part on the pretty astounding pricing that's been achieved on some sales,” Plasencia says. “Just like Tampa Waterside did, it made a statement in and about the marketplace. It substantiated Tampa as an attractive place for institutional owners.”

Peek, too, believes more nine-figure sales could be forthcoming in the next year or so, based on the area's growth, industry fundamentals and institutional perception.

“While it's not been typical in the history of Tampa, I think we'll see at least a couple more transactions of the same magnitude, for sure.”

- K.L. McQuaid