San Jose — The quest for a private equity firm to unload most of its accommodation portfolio has triggered the sale of at least four motel 6 hotels in South Bay.
Buyers paid a total of $ 40.3 million to the three hotels, according to a certificate filed with the Santa Clara County Records Office.
Recently purchased hotels include motel 6 hotels in San Jose, Santa Clara, Gilroy and Campbell.
The sellers in all four cases were hotel affiliates managed by New York City-based private equity firm Blackstone.
“Blackstone is trying to sell many of its motel 6 properties,” said Alan Ray, president of Irvine-based Atlas Hospitality Group, which tracks the California accommodation market.
Budget hotel brands tend to outperform full-service hotels for business travelers and convention events that have been financially hit by coronavirus-related shutdowns and restrictions.
However, budget hotels that still require a certain amount of staff may not be considered as profitable as other hotels that generate far more revenue by running with a modest level of employees.
“At budget hotels, labor costs make up a large percentage of revenue,” says Reay.
Recent deals on properties at Motel 6 in the Bay Area sold by Blackstone affiliates include:
— Motel 6,100 rooms at 3208 El Camino Real in Santa Clara, purchased on July 7th for $ 13.5 million. The purchaser was a Texas-based group led by Jagmo Handyron, Principal Executive of DMC Hotel and Dillon Management.
— Motel 6,127 rooms on Gilroy’s 6110 Monterey Road, purchased June 23 for $ 10.5 million. Buyers were Jayesh Patel and Hemaben Patel based in the Canoga Park area of Los Angeles.
— Motel 6,76 rooms at 2081 N. First St. in North San Jose, purchased on June 15th for $ 8.5 million. The hotel is about a block from the huge tech campus that Google leased a few years ago. The purchaser was Temple Santa Nella, a group led by Ravi Patel, based in the city of Gustine, Merced County.
— Motel 6, 19 rooms at 1240 Camden Ave. in Campbell, purchased May 20 for $ 7.8 million. The purchaser is San Francisco-based Ambika Enterprises, headed by Devendra Patel.
In 2012, Blackstone acquired G6 Hospitality. G6 Hospitality launched the Motel 6 Chain in 1962, offering a $ 6 / night stay at a hotel in Santa Barbara. The purchase included over 1,000 motel 6 and studio 6 hotels. Studio 6 Hotel is a long-stay brand.
“Motel 6 hotels typically serve both leisure and business travelers,” says Reay. “They definitely cater to travelers who want an economical choice to stay in a hotel.”
Transactions related to Motel 6 properties are taking place as the accommodation market seeks to recover from a series of financial illnesses caused by the coronavirus.
“The Bay Area leisure and resort market is recovering strongly and many are making record profits,” says Reay.
However, for hotels in business-oriented markets such as Silicon Valley and San Francisco, post-COVID recovery is much weaker.
“Downtown convention centers like San Francisco and San Jose still have a lot to catch up with,” says Reay. “You can’t switch it on and fill it up right away. They’re still lagging behind the leisure and resort markets.”