UPDATED: OCTOBER 4, 2017 7:11 PM — Hollywood-based hotel owner-operator AD1 Global paid $4.065 million last week for the 5.18-acre site southeast of SeaWorld where it plans a dual-brand property, and is the fourth land sale for a new hotel in the International Drive tourism corridor this month.
The AD1 deed was signed Aug. 14, and recorded Monday morning in Orange County. The company sourced a $2.7 million loan from RBI Mortgages in Hallandale Beach to help finance the land purchase, which reflects $14,517 per key.
AD1 filed plans on Aug. 10 for a 280-key, dual-brand hotel on the property with Starwood flags Aloft and Element by Westin. Part of the acquisition value of the site was that its seller, Sanford-based developer Matthew Gillio, had their own Development Plan approved in 2016 for two select-service hotels totaling 315 rooms, offering a fast track to DP approval for a buyer by converting those plans.
The acquisition follows three earlier this month for hotel project sites in the I-Drive corridor.
Miami-based Epelboim Development Group paid $5.5 million on Aug. 3 for a 4.46-acre site on Westwood Boulevard that was fully entitled by the seller for a planned 259-key Tru by Hilton ($21,235 per key).
On Aug. 15, Brazilian hotel owner-operators Grupo Atlantico paid $2.4 million for 2.35 acres on Carrier Drive, southeast of the former Wet 'n Wild property, with entitlements and plans for a 157-key hotel that they'll convert for their own independent flag ($15,286 per key).
And on Aug. 15, New York-based developer and property manager Empire Equities paid $6.4 million for 5 acres next to Epelboim's Tru hotel site on Westwood Boulevard, with an expectation to shift its previously approved plan for a 365-key hotel there from a Universal Boulevard site it couldn't close on last year ($17,534 per key, if same room count is applied).
The recent spate of hotel land acquisition activity should not surprise for this point in the recovery of our current economic cycle, which has matured to a point that hotel acquisition price has reached replacement cost, said Paul Sexton, vice president of HREC Investment Advisors, a national brokerage offering consulting, development and asset management services to the hotel industry.
"What is interesting is that -- ignoring for a moment all of the hotel construction associated with Universal, which is a bit of an outlier situation -- the Central Florida hotel development market has actually been slow to gain momentum relative to other markets around the U.S.," he told GrowthSpotter. "This is due, in large part, to the fact that average rates in the Orlando area are, typically, less robust than in other markets, yet the cost of construction is really no different.
"As such, it has been comparitively more difficult to get financing for new construction and, therefore, there have been relatively fewer additions to supply," Sexton continued. "That being said, given that the market is running historically high occupancies, developers are finding a way to get their projects financed."
The pricing seen recently for hotel development sites has not changed much over the past eight years. For example, Drury Hotels paid roughly $19,000 per room for their site on W. Sand Lake Road in June 2009 during the depths of the recession, Sexton said.
These recent examples indicate that land hasn't gotten materially more expensive as the economic recovery timeline progresses. This may be caused by competition amongst sellers to land a buyer, or hotel developers negotiating harder on land as their construction costs rise.
New hotel development in Greater Orlando has also been constrained in part by the availability of corporate flags, Sexton added. As leading brand families Marriott, Hilton, Hyatt and IHG have added new flags to to the market in recent years it has opened up new development opportunity in the tourism corridor, as with Epelboim's Tru by Hilton, AD1's Aloft and Element by Westin, or Prisa Group and Unicorp National Development's proposed Element at the I-Drive 360 complex.