Sunburst Armed With $100M for Hotel Deals

SILVER SPRING, MD-Locally-based Sunburst Hospitality is revving up for an acquisition spree with roughly $100 million--part of which will come from the company’s recent sale of Vista at Courthouse for $85 million.

That sale marks a change in Sunburst’s investment strategy, Chris Milke, vice president of Acquisitions & Development, at the company tells GlobeSt.com. Going forward for the foreseeable term, the company will only be investing in hotels.

It is looking for limited and full-service hotels and extended-stay hotels with target room counts of 70 to 300 rooms. It is also interested in hotel debt notes, with a first mortgage size of $5 million to $50 million--either performing or non performing.

While the company is open to any deal nationwide, it has a preference for the East Coast "or at least this side of the Mississippi," Milke says. Also, the $100 million is not a figure etched in stone, he adds. "If we want to spend more we can figure out how to make that happen." The company has about $300 million of private equity under its belt as well.

Unlike funds with a specific time frame to invest, Sunburst is not looking to invest its capital over a certain period if the deals are not available - which certainly has been an issue for investors ranging from private funds to REITs to institutional investors.

Also, in certain markets--namely the Washington DC area where Sunburst is located--there have been virtually no hotels trading.

Milke, though, believes that will change - both in the DC area and nationwide. There are a handful of hotels on quietly on the market--Sunburst has chased a few of these, Milke says. DC, though, is unlikely to see any distressed sellers put assets on the market--which is where Sunburst would like to play and where Milke expects to see the best deals.

"If nothing happens here we will go elsewhere. There are distressed owners dealing with banks directly right now and if they are unable to get a work out done and the proverbial pretend and extend is no longer palatable to banks, that is where we will come in."

It’s a strategy on which a lot of investors are waiting to pull the trigger, but hotels in particular are ripe for it, he says. While some banks may keep an office building on their balance sheet, for example, or an apartment building, few if no banks are interested in holding onto hotels, Milkie says.

By Erika Morphy

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