PALO ALTO — A big Midwest investment group has spent $115 million to buy five Bay Area hotels, including two in Silicon Valley, a strong indicator that veteran players see long-term potential in the region’s lodging market despite COVID 19-linked challenges.
Oxford Capital Group has bought a hotel in Palo Alto, one in Los Gatos, and three in San Francisco, in a series of just-completed transactions that arrive amid brutal economic woes unleashed by the coronavirus.
Chicago-based Oxford Capital, acting through multiple affiliates, paid $53.8 million for the two hotels in Santa Clara County and $61.2 million for the hotels in San Francisco, according to public documents and property experts familiar with the transaction.
Creekside Inn at 3400 El Camino Real in Palo Alto was bought for $$32.7 million, according to county documents filed on Dec. 11.
Hotel Los Gatos at 210 E. Main St. in Los Gatos was bought for $21.1 million, public records filed on Dec. 10 show.
“We have been contrarian, value-oriented investors in the lodging sector for nearly 30 years,” said John Rutledge, founder and chief executive officer of Oxford Capital Group.
Oxford Capital has launched significant investment gambits even during epic economic downturns of recent decades.
“Through multiple cycles we have consistently had the courage of our convictions to step up during periods of great uncertainty,” Rutledge said.
Oxford Capital bought the hotels at an excellent price compared to what their values would have been prior to the coronavirus-triggered economic slump, said Alan Reay, president of Atlas Hospitality Group, which tracks the lodging market in California.
“This is an excellent long term buy for Oxford Capital,” Reay said. “They have purchased quality hotel assets in ‘A’ locations, with huge barriers to entry.”
The $115 million price tag for the entire package of hotels, sold by affiliates of Greystone Hotels, is about 36% less than what would have been a typical value, Reay estimated.
“The purchase price is at a big discount to what we would expect to have seen pre-COVID,” Reay said. “I would have expected that pre-COVID, these hotels could have sold for $180 million.”
Oxford Capital Group assumed $15 million in debt as part of its $32.7 million purchase of Palo Alto’s Creekside Inn and also assumed $17 million in debt through its $21.1 million acquisition of Hotel Los Gatos, county public documents show. The debt had been incurred by the seller through separate mortgages in 2015 of the properties.
Among the details of the hotels:
King George Hotel in San Francisco, 153 rooms, opened in 1914.
Creekside Hotel in Palo Alto, 136 rooms, opened in 1955, includes CIBO restaurant
Hotel Los Gatos, 72 rooms, opened in 2002, Dio Deka restaurant.
Hotel Griffon, San Francisco, 62 rooms, opened in 1906, Perry’s restaurant.
The Inn at Union Square, San Francisco, 30 rooms, opened in 1980, includes Chloe’s Gallery.
“We are optimistic about the recovery potential of the Bay Area lodging market,” said Sarang Peruri, Oxford Capital Group’s chief operating officer. “These properties are poised to outperform given unique product offerings and locations.”
The investment firm has bought properties even during cataclysms such as the savings and loan debacle, the 9/11 terrorist attacks and the worldwide financial crisis..
“Despite the current challenging environment in the travel and hospitality space, we remain sanguine about the medium- to long-term desirability of downtown San Francisco and Silicon Valley,” Rutledge said.