New York-based Three Wall Capital LLC recently paid $8.9 million for the Candlewood Suites Lake Mary, an extended-stay hotel at 1130 Greenwood Blvd.
The seller was The Generation Companies LLC, a real estate management and development business located in Raleigh, N.C., according to a deed signed Sept. 24 and filed Tuesday in Seminole County. The Generation Companies purchased the hotel in October 2016 for $7.5 million.
Managers at the two companies could not be reached for comment
Candlewood Suites was only the second hotel sold in Seminole County this year, according to the county Property Appraiser’s Office. Altamonte Hotel & Suites, formerly Extended Stay of Altamonte Springs, sold for $5.8 million on June 11, according to county land records.
The buyer of the 263-room Altamont Hotel & Suites, located at 230 W. State Road 436, was Extended Stay of Altamonte Springs LLC, a company run by Ormond Beach real estate investor Ty Lohman.
Lohman and his family were in the news several years ago for selling six apartment complexes totaling 1,250 apartments in Daytona Beach for $63 million, according to the Ormond Beach Observer.
The seller of the Altamonte Springs hotel was Inner Circle Investments, an Ormond Beach firm founded by principal Joseph Gillespie. Inner Circle specializes in buying undervalued hospitality properties that can be renovated and resold for a profit.
Experts with knowledge of the Seminole real estate market are not surprised at the low rate of hotel turnover there. Inventory is very tight, they say, and will likely stay that way for at least the rest of the year as hotel owners hold onto their properties in a strong market.
“I’ve been selling hotels for three decades and the inventory in the last few years is as thin as I’ve ever seen it,” said Robin Webb, senior managing director at LandQwest Central Florida. “The hospitality industry is one of great prosperity at the moment. We’re seeing few people who are willing to put their properties on the market. It’s an odd phenomenon.”
But the market could soften some in the next few years as more hotels are built in the county. Webb said he knows of five hotel sites that that are in the pipeline for county or city approvals.
“We are going to be seeing in the next 24 months at least five, maybe seven or eight hotels enter the market,” he said. “If we add another 1,000 rooms to the Seminole inventory, you will see a slight amount of softness in the marketplace, and I think that will motivate some of the owners of older properties to become sellers.”
While one might suppose owners would want to sell in a tight market when they can get top dollar, sometimes the opposite is true. Webb said hotel owners tend to be optimists who believe things will get even better.
Hotel business in the entire Orlando area is in a mild slump, said Michael Weinberg, managing director of Berkadia’s Orlando office. Hotel room occupancy in Orlando year-to-date compared to 2018 is down 2.8 percent, according to the latest STR Hotel Review. Revenue per room (RevPAR), a common metric used in the industry, was down 2.3 percent.
“It harder to sell into that environment when there is a little flat-lining of performance,” Weinberg said.
And while hotel sales in Orange and Osceola counties are down from previous years, the situation is even more constrained in Seminole County because of the lower inventory.
“Seminole is driven by office and medical demand,” Weinberg said. “It’s a little insulated from tourist demand.”
Another factor in the slow sales is the low cost of debt, Weinberg said, which incentivizes hotel owners to refinance their properties rather than sell them. And hotel owners who might want to sell won’t because there are no hotels they can buy with the proceeds.
“It’s a little bit of catch 22,” Weinberg said. “I can’t find anything to put money into and get returns so I might as well hold onto my assets and refinance.”