New Jersey-based Pinnacle Hospitality Group paid a recorded $8.453 million on Friday for its second hotel in Orlando's tourism corridor, fulfilling part of a 1031 exchange opportunity it started last fall with a local sale.
Located at 8200 Palm Parkway, set on 5.8 acres and 3.3 miles from Disney Springs, the 123-key Quality Suites Lake Buena Vista was built in 1998 originally as a Homewood Suites and then converted to a condominium hotel.
The sale closed on Feb. 16, but was recorded Wednesday morning in Orange County.
"Being in Lake Buena Vista amongst high-end hotel properties was a plus for us on this asset, it's a (submarket) we've wanted to be in for some time," Pinnacle managing member Chet Patel told GrowthSpotter.
His company has no immediate plans to change the hotel's flag, "but rebranding is always an opportunity in the future, especially because it's an all-suite property" with new flag options in the market, Patel added.
Pinnacle Hospitality owns and manages one other hotel in the Orlando market as of now -- the Country Inn & Suites on Universal Boulevard.
The company's principals were actively looking for new Orlando-area assets to invest in to fulfill a 1031 exchange, after selling two hotels on International Drive in October for $24.3 million to Rosen Hotels.
This is the second of three hotel purchases Pinnacle planned to close on before April to maximize the 1031 tax-deferred savings opportunity. The first came in late December, when it paid $2.65 million for a 3.5-acre hotel site at Kissimmee's Crosslands shopping center, with approved plans for a 128-room Hampton Inn.
The Quality Suites seller was an affiliate of Kissimmee-based Carter Hospitality Group, itself an affiliate business of California-based SGI Partners, which took ownership of the property through foreclosure in 2011 and stabilized the asset with its property management division while buying back the condo units from individual owners.
The sale to Pinnacle was an off-market deal, facilitated in part by primary transaction broker Paul Sexton, vice president of HREC Investment Advisors.
Growth opportunity for the property can come through renovation and improved marketing, which Patel declined to forecast an investment value for on Wednesday.
The property also stands to gain from the overall growth in traffic along Palm Parkway, due in part to the opening of Daryl Carter Parkway, an anticipated new I-4 interchange at that intersection, and new commercial and residential development all along the road.
"Three years ago this neighborhood of hotels was kind of an 'end of the road,' if you will," Sexton said. "These were good B locations. But with Daryl Carter Parkway opening it now takes five minutes or less to get from the (south Palm Parkway neighborhood) to the (Vineland Premium) outlet mall. It has become an A neighborhood, and all the ancillary projects in development along Palm Parkway are evidence of that."
The buyer sourced a $7.842 million loan from Ready Capital Structured Finance to help close the acquisition.
Not far from the Quality Suites location along Palm Parkway, Carter Hospitality is also in the process of selling 6.44 acres that wrap around Ravallo Resort Drive, which is bought in mid-December 2015 with entitlements for up to 900 hotel keys.
Sexton of HREC has been marketing that land for sale in recent months. The site lies at a Palm Parkway/Lake Avenue intersection that should have a full traffic signal installed this year.