An affiliate of one of China’s largest construction companies has purchased the Hyatt Regency Orange County in Garden Grove for $137 million.
SCG America, an affiliate of China-based Shanghai Construction Group, last week completed the purchase of the 653-room hotel, Orange County’s fifth largest by room count.
The 17-story property is at 11999 Harbor Blvd., a little more than a mile south of the Anaheim Convention Center and the Disney Resort area.
The property traded hands at about $210,000 a room and a 7.1% capitalization rate, according to Orlando, Fla.-based Xenia Hotel & Resort Inc., which sold the hotel and now owns six hotels in California but no others in Orange County.
It’s the second-priciest individual hotel sale in Orange County this year, topped only by the $360 million purchase of the Montage Laguna Beach resort in January by Strategic Hotels & Resorts Inc. of Chicago.
SCG
The Hyatt is expected to be the cornerstone investment of the Shanghai Construction Group affiliate in the Western U.S.
Shanghai Construction ranked as the world’s 11th-largest general contractor last year, with revenue of nearly $25 billion, according to trade publication Engineering News-Record.
SCG America has offices in Los Angeles. Its website lists two hotels in its portfolio, including a La Quinta Inn & Suites in Pomona.
The company also owns and develops homes and mixed-use properties in Los Angeles and New York, according its website. SCG intends to have $2 billion in assets under management by 2018, according to marketing materials.
Chinese investors have been active hotel buyers on both coasts of the U.S. recently; notable deals include the Baccarat Hotel in New York, which sold for a record $2 million a room this year to China-based Sunshine Insurance Group Co., as well as pricey buys in Los Angeles and San Francisco.
Three Companies
Last week saw reports that three big Chinese companies were vying to buy Starwood Hotels & Resorts Worldwide Inc., the Stamford, Conn.-based hotel operator that runs brands such as Westin, W Hotels and St. Regis and has more than 1,200 properties.
A deal with any of the three prospective buyers could be the largest-ever Chinese acquisition of a U.S. company, according to the Wall Street Journal, which broke the news of the potential deal.
Chinese investors “love the asset class,” said Alan Reay, president of Atlas Hospitality Group, an Irvine-based hospitality consultant and brokerage.
That’s in large part due to the expansion of China’s middle class, which is bringing more tourists—and hotel guests—to the U.S., Reay said.
“The West Coast definitely benefits from that,” he said.
Orange County’s hotel market hasn’t seen as much investment from China outside of deals from Hong Kong-based real estate owner and developer Wincome Group, which has several area properties (see story, page 3).
Record Price
Inland American Real Estate Trust Inc., an Oak Brook, Ill.-based investor, spun off its hotel division into Xenia Hotels earlier this year to focus on other real estate property types.
The Hyatt Regency was valued at about $140 million at the end of 2014 by Inland American, according to regulatory filings.
It paid $112 million for the property in 2008 and subsequently put in about another $25 million in renovations.
The $210,000-per-room price paid by SCG America for the Hyatt Regency is believed to be the highest ever per-room price paid for a hotel in Garden Grove, according to city officials.
Xenia officials cited increased hotel competition in the Anaheim resort area, as well as the need to make additional upgrades to the property as reasons for the sale.
The transaction “allowed us to take advantage of the private market valuation for a legacy hotel in our portfolio that we expected to deliver below-average growth as additional supply is entering this competitive and relatively low-rated market,” Xenia Chief Executive Marcel Verbaas said in a news release.
“Given the market’s dynamics and the hotel’s position, we concluded that near-term capital requirements would not represent a prudent additional investment for the company,” Verbaas said.
A multiyear makeover of the 30-year-old property is now expected following the ownership change, and more development on the property is possible.
The hotel will remain a Hyatt-branded property.
More than 2,000 hotel rooms in the resort area—in Anaheim and Garden Grove—have opened since the start of 2014 or will open by the end of 2016, according to data from the two cities.
Great Wolf
The largest of those projects, the 603-room Great Wolf Lodge Southern California in Garden Grove, will open early next year, according to the project’s developer, Loveland, Colo.-based McWhinney Real Estate Services.
The Great Wolf project, which features a 121,000-square-foot indoor water park, is about half a mile south of the Hyatt Regency on Harbor Boulevard.
Market trends appear to be justifying the new construction.
The Anaheim-Santa Ana area saw the largest third-quarter increase in revenue per available room, or RevPar, among major markets in the U.S., according to a recent report from STR Inc., a Hendersonville, Tenn.-based hotel industry market tracker.
RevPar at hotels in and around the Anaheim resort area rose 12.5% to $130.90 last quarter, according to STR’s data.
