Real Deals

Connecticut firm pays $24.4 million for two Triangle hotels

dbracken@newsobserver.comSeptember 26, 2012 

A Connecticut real estate firm is the latest institutional investor to establish a presence in the Triangle.

This week, Greenwich-based Wheelock Street Capital acquired two Triangle hotels, including the Homewood Suites behind Crabtree Valley Mall.

Wheelock paid $15.18 million for the 137-room Homewood Suites and $9.2 million for the 129-room Hampton Inn just off U.S. 1 in Cary, according to Wake County property records.

The properties were part of a portfolio of 12 hotels in the Southeast, Texas, Illinois and Arizona that Wheelock bought from Inland American Real Estate Trust for $116 million. Inland had acquired the two Triangle hotels as part of its $834 million acquisition of Winston Hotels in 2007.

Inland made significant renovations to hotels in the portfolio between 2008 and 2010, and Wheelock is hoping to reap the benefits of those investments as the hospitality industry continues to recover. The company is also betting that a market such as the Triangle isn’t likely to see an influx of new hotel construction that could sidetrack a recovery.

The Crabtree area will get a new hotel in December when the Winwood Hospitality Group opens a 135-room Hampton Inn and Suites on the former site of the Crabtree Inn. Pappas Properties of Charlotte also recently won approval from the city for a project behind the mall that could include a 200-room hotel.

Those projects alone aren’t likely to destabilize the Crabtree market, which includes a wide range of hotels offering different levels of services.

“I think the existing product that is there continues to do well,” said Loren Gold, executive vice president at the Greater Raleigh Convention and Visitors Bureau.

Although there are now 1,525 rooms in the dozen hotels that brand themselves with the Crabtree name, the area has actually seen a net reduction in total rooms in recent years, said Amit Patel, president of Morrisville-based Winwood.

The developers of the defunct Soleil Center project tore down the old Sheraton Hotel at Crabtree that had more than 300 rooms, and Winwood’s new hotel will have about 45 fewer rooms than the Crabtree Inn that it is replacing. Those older hotel rooms may not have been very competitive, but they were depressing the revenue per available room numbers for the area, Patel said.

Patel said he’s hoping Winwood has timed the opening of its new hotel just right given the recent improvements in revenue per available room in the Crabtree area. That revenue was $60.21 through the first eight months of the year, up 3.1 percent from the same period a year ago, according to Smith Travel Research, a Tennessee company that tracks the lodging industry. The Crabtree area’s occupancy level was 66.2 percent, down 2 percent, over that same period.

Occupancy levels are the first thing to bounce back after an industry downturn. What’s most important to hotel owners is how that occupancy is distributed throughout the week.

If occupancy levels are highest during the middle of the week when demand from business travelers is strongest, then owners are in a position to raise rates.

The anemic economic recovery has delayed that inflection point, but Patel and other hotel owners hope it has finally arrived.

“I think from an occupancy standpoint, we’re back to 2007 levels,” Patel said. “The rate is still not there yet, but we think in the next 24 months we should be back to the (average daily rate) that we’ve previously seen at the market high.”

Bracken: 919-829-4548

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