BERKELEY — The University of California’s investment arm has bought a big East Bay hotel for well under its appraised value, a deal that hints at lingering ailments in the Bay Area lodging sector.
UC Investments, acting through an affiliate, has paid $175.8 million for the 331-room Residence Inn Berkeley, a Marriott brand hotel, according to documents filed on Oct. 8 with the Alameda County Recorder’s Office.
“This hotel has a very good location in Berkeley,” said Alan Reay, president of Atlas Hospitality Group, which tracks the California lodging market. “Residence Inn is the most profitable brand that Marriott has.”
The 16-story hotel is at 2121 Center St. near Shattuck Avenue in the lively downtown Berkeley district. It’s also about a block from the UC Berkeley campus.
The purchase of the hotel at 2121 Center St. in downtown Berkeley occurred at a time when the Bay Area lodging market is beset by fading values, defaults and foreclosures.
The widening financial setbacks for the lodging industry have chilled efforts to develop hotels throughout California, including in the Bay Area.
The UC Investments affiliate bought the 16-story Residence Inn Berkeley through an all-cash deal, the county documents show.
In 2023, the hotel was appraised at $218 million in connection with a $120 million financing package the hotel received at that time, according to a report produced by MSCI Real Capital Analytics. The hotel also had previously received $50 million in C-PACE financing for an energy-efficient structure.
This means the price UC Investments paid was 19.4% less than the appraised value of the hotel.
“UC Investments got a very good deal for this hotel,” Reay said.
The price worked out to roughly $531,100 a room. Reay estimated the expense to build an equivalent hotel from scratch today, a metric also known as the replacement cost, would be in the range of $700,000 to $900,000 a room, which makes the price made look even better.
Pyramid Global Hospitality, through an affiliate, sold the hotel to Oakland-based UC Investments.
“UC Investments manages the University of California’s retirement, endowment, working capital, and cash assets under the policies, guidelines, and performance benchmarks established by the UC Board of Regents,” the organization states on its website.
The university entity manages a portfolio that in June 2024 was valued at $179.82 billion, which was up 9.6% from the $164 billion portfolio as of June 2023, UC Investments states in the most recent annual report posted on its website.
At present, the portfolio has reached roughly $190 billion, according to the investment organization.
“Retirement, endowment, and cash assets” are the main components of the portfolio, UC Investments states on its website.
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