Gaw Capital Adds Oakland Marriott Hotel to US Portfolio for $143M

Hong Kong’s Gaw Capital has agreed to purchase the Marriott City Center hotel in Oakland California for $143 million, according to sources familiar with the transaction who spoke with Mingtiandi.

The private equity real estate shop is buying the 494-room east bay landmark from a joint venture between New York-based Apollo Global Management and Bay Area real estate investment house DiNapoli Capital Partners, as it anticipates future market growth in the high tech centre’s urban core.

The Oakland hospitality acquisition comes amid a flurry of California deals by Gaw-controlled businesses, including the recent $42 million sale of an office building on Mission Street in San Francisco and a March acquisition of a 21,000 square metre (228,573 square foot) office block in the city’s Chinatown.

Betting on the Brooklyn of the Bay Area

Gaw Capital, which is buying the hotel through its $315 million US Fund II, sees the acquisition as an opportunity to benefit from the ongoing urbanisation and tech driven economic growth in the communities surrounding San Francisco. “Oakland is becoming the Brooklyn of the Bay Area,” a source familiar with the transaction told Mingtiandi. “Corporate headquarters in the Bay Area are moving into the city, and Oakland is urban core.”

The company sees this move towards the inner city as good news for downtown hospitality providers. “For Bay Area hotels, there’s a limited supply, it’s hard to build, and the economy is booming,” the source told Mingtiandi. The Oakland Marriott connects to the city’s convention centre, and also serves as the manager for the business facility.

Gaw already owns the 162 room Marriott Courtyard across the street from the Marriott City Center, and with this latest acquisition, the firm estimates that it controls the majority of the hotel rooms in downtown Oakland.

Oakland Hotel Jumps Over 40% in Price in Two Years

Gaw’s purchase of the hotel, which includes 89,000 square feet of meeting space, works out to $280,474 per room, a mark-up of more than 40 percent from the price per room paid by its current owner, a joint venture between Apollo and DiNapoli Capital Partners. The pair of private equity firms acquired the 21-storey property for $80 million in 2015 according to information from data provider Real Capital Analytics, when it was listed as having 389 rooms, and completed a $22 million renovation of the hotel late last year. Apollo invested in the Oakland hotel through its US Real Estate Fund II, which was said to have contributed $32 million of capital to the joint acquisition.

Gaw Capital already has a number of California hospitality properties in its portfolio, including the MacArthur Hotel in Los Angeles, the Courtyard Marriott in Sacramento, and the Hotel G in San Francisco, which is operated under the company’s Hotel G hospitality affiliate.

Gaws Buying and Selling San Francisco Offices

News of Gaw Capital’s hotel acquisition comes less than two months after the private equity firm purchased 555 Montgomery Street, an office block adjacent to San Francisco’s Transamerica Building, from Nasdaq-listed savings and loan East West Bancorp for $120.6 million, according to public records obtained by Mingtiandi.

Gaw’s purchase of the circa 1984 17-storey tower gives the PE firm’s chairman control of yet another property in San Francisco’s urban centre. In addition to the 21,235 square metre (228,573 square foot) grade A office block, Downtown Properties – where Gaw serves as managing principal – already owns 300 Montgomery, 550 Montgomery and the Embarcadero Square retail commercial complex on Davis Street in the city.

Demand for space from the Bay Area’s booming tech markets helped drive average San Francisco grade A rental rates up by 2.56 percent in the first quarter of this year, compared to the same period of 2016, according to a recent report by Colliers International.

In addition to Gaw Capital’s Bay Area acquisitions, privately held Downtown Properties has reportedly sold an office building on San Francisco’s Mission Street to Beijing-based developer Sino-Ocean Land for $42 million, according to US media reports citing sources familiar with the transaction.