North Charleston hotel sale a reminder of real estate industry’s overexuberance
A company from the nation’s heartland has checked out of the local hotel business.
It proved to be a costly stay for Supertel Hospitality Inc., and a somber reminder of a go-go period that most real estate investors would just as soon forget.
The Norfolk, Neb.-based company recently shed the Masters Inn at 6100 Rivers Avenue near Aviation Avenue in North Charleston for $1.18 million. The buyer, S.C. Swami Investments LLC of North Augusta, snapped up the 150-room property at a steep 67 percent discount. Supertel acquired the budget lodging for $3.55 million six years ago.
The $2.4 million haircut reflects the punishment the last recession inflicted on commercial real estate values, locally and nationally.
Supertel went on a $43 million hotel-buying binge right before that long downturn bared its teeth in 2008, overpaying as it would later rue.
The CEO acknowledged as much two years ago, when the company started to sell off some of those underwater lodgings, including one in Mount Pleasant, in order to pay down some of its debt.
“During the 2005 to early 2007 timeframe, Supertel … acquired a substantial number of hotels at prices that, by today’s market standards, would be difficult to justify,” said Kelly Walters, who took the reins of the real estate investment firm in 2009.
Walters went on to say in that 2011 statement that those purchases were based on overly exuberant projections that turned out to be unsustainable.
As the recession wore on, the outlook didn’t improve, so Supertel elected to shift away from the economy lodging niche and focus on higher end, select-service properties.
In the second quarter of this year, it unloaded eight budget hotels, including the Rivers Avenue inn, as well another in Cayce.
“An orderly repositioning of Supertel is well underway as the company has thinned out the portfolio by monetizing many of the assets that were not contributing meaningfully to the firm’s profitability,” Walters said in a written statement last month.
Two years ago, Supertel unloaded its only other local property, the aging Masters Inn on Wingo Way in Mount Pleasant. In that case, the pain wasn’t quite as severe as the North Charleston sale, just a 13 percent decline from the original $4.3 million purchase price. The disparity probably says more about location than the improved state of hotel pricing.
The local buyers of the Wingo Way lodging closed the low-slung property near the foot of the Ravenel Bridge on June 1. They plan to demolish it and replace it with a shiny, new six-story Hilton Garden Inn by mid-2014.
So the rebounding commercial real estate cycle goes onward.
Contact John McDermott at 937-5572.