By Gail Kalinoski, Contributing Editor
Hall Equities Group acquired the full- and limited-service assets owned by ZMC Hotels, Inc. – 29 hotels with 3,000 rooms across 10 states – in what is considered one of the top hotel portfolio deals of the year.
Both Hall Equities, a real estate investment, development and property management firm, and ZMC are privately owned and no financial details were made public. The hotels are located in Alabama, Arizona, Florida, Kansas, Michigan, Minnesota, Missouri, North Carolina, Oklahoma and Wisconsin and include brands such as Hampton Inn, Holiday Inn, Marriott and Comfort Suites.
Kenneth Goldfine, chairman of the board & CEO of the Duluth, Minn.-based family-owned business, said in a prepared statement that the family had operated many of these hotels for 40 years and wanted them sold as a portfolio. Maintaining the staff of about 1,000 employees was also important, he said.
“Offers for individual properties abounded, yet the team was steadfast to pursue our goal to find the right buyers who wanted the entire set of hotels,” he added.
Goldfine said they wanted to work with a capital markets team that “best understood how to execute our goal.”
That team came from NGKF Capital Markets and featured Mark Sweeney and Mike Zylstra of Newmark Cornish and Carey, along with Doug Schuster, Curt Allsop and Vittal Ram of Newmark Grubb Knight Frank’s Las Vegas office.
“The timing was excellent to market this portfolio,” Zylstra, senior managing director of NGKF Capital Markets, said in a prepared statement. “On a national basis, both the full- and limited-service segments of the hotel industry have experienced robust activity with impressive year-over-year gains. This activity, especially in the limited-service segment, indicates broad investor interests for hotel investments, which certainly reflects our experience with the ZMC portfolio.”
For Hall Equities of Walnut Creek, Calif., the acquisition boosted its hospitality portfolio.
“We have had a few hotel investments over the last ten years, but with this acquisition, we will now be able to include hospitality product in our portfolio of investment opportunities in a more significant manner,” Mark Hall, CEO of both Hall Equities and Zenith Asset Co., an affiliate of Hall Equities that will be managing the new properties, said in a prepared statement.
Hall Equities owns 140 properties with nearly 10 million square feet across a variety of CRE sectors in 16 states. The hospitality portfolio now has about 4,000 rooms in 34 properties. Hall Equities plans to spend $40 million on capital improvements within the ZMC Hotel portfolio. Zenith also plans to build several new hotels.
“We will employ the operational skills and experience of the ZMC team together with our own homegrown development and construction management experience to immediately focus on building five new hotels, including two in Scottsdale, Arizona, one in the Puget Sound region, one in our hometown of Walnut Creek and one in Duluth,” Hall said in a prepared statement. “Additional projects will be pursued in coming years.”
Equity to purchase the portfolio came from several sources including the sale of three properties owned by Hall-sponsored investment groups, cash on hand and the refinancing of two-multi-family buildings through Wells Fargo Bank and JPMorgan Chase. Some financing for the hotels purchase was provided by Bank of America.
One of the properties sold was Monte Vista Crossings in Turlock, Calif., a large open-air regional shopping center. The buyer was Excel Realty Trust, which retained Hall Equities for ongoing leasing and construction of a new phase. Blackstone Property Partners, L.P. recently acquired Excel.
The Arroyo, a six-story, 100-unit luxury apartment building under construction in Walnut Creek, was sold to a major U.S.-based life insurance company that retained Hall Equities as general contractor and property manager.
The third property sold was a 41,000-square-foot office building at 289- North Main St. in Walnut Creek that serves as a regional banking center. The buyer was not identified.
Hall Equities Group was represented by the law offices of Jay Schnack for the sales transactions. Van Tengverg and Nir Margalit with the law firm of Foley and Lardner in Milwaukee, Wisc., handled the ZMC Hotel portfolio sale.