CBRE Global Investors Fund Buys Hotel in San Jose

By Gail Kalinoski, Contributing Editor

CBRE Strategic Partners U.S. Value 6 fund is making its first hotel acquisition with the purchase of the San Jose Marriott, a 506-room, full-service hotel that is attached to the San Jose Convention Center.

Sponsored by CBRE Global Investors, fund officials did not publicly disclose the sale price or the seller citing a confidentiality agreement. However, several media reports state it was Prudential Real Estate Insurance (PREI). The Silicon Valley Business Journal put the price at between $80 million and $85 million while the Private Equity Real Estate (PERE) global news service said the hotel sold for $83 million. CBRE Global Investors would only say that it bought the 28-floor hotel at 301 Market St. for “significantly less than replacement cost.”

“The Silicon Valley lodging market is fed by strong corporate demand from the significant concentration of high-tech companies in the region,” Vance Maddocks, president of CBRE Strategic Partners U.S., said in a news release. “With strong current cash flow, the San Jose Marriott, in particular, is an attractive business hotel with an added benefit of being directly connected to the now-expanding San Jose Convention Center.”

The Strategic Partners U.S. team is planning renovations at the hotel, which opened in early 2003. The plan includes upgrades to guest rooms, suites, corridors, the lobby, and meeting space, according to a CBRE Global Investors spokesperson. The dollar amount was not released.

SCS Advisors, the original developer of the hotel and a leading hotel asset management company, will serve as the asset manager. The hotel was built for $93.9 million with $10.6 million provided by the San Jose Redevelopment Agency, according to an agency document. It is still the newest hotel in the submarket, according to CBRE Global Investors. Features include a swimming pool, fitness room, business center, 23,000 square feet of meeting and event space and acclaimed restaurants.

The hotel purchase comes five months after the Strategic Partners U.S. team purchased Fairmont Plaza, a 17-story office building at 50 West San Fernando St. in downtown San Jose, from Forest City Enterprises Inc. for $93.1 million.

CBRE Global Investors closed the Strategic Partners U.S. Value 6 fund in December with equity commitments of almost $1.1 billion from 22 institutional investors. It is expected to have total purchasing power of $2.7 billion. As of December, the fund had already closed on or committed more than $900 million in investments, including several multi-family and office properties.

The global real estate investment management had $90.7 billion in assets under management as of March 31. It is an independently operated affiliate of CBRE Group, Inc. Founded in 2000, the Strategic Partners U.S. program has closed eight funds and three co-investment partnerships.