Proposed Select-Service Hotel Foster City
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SUMMARY OF FINDINGS Proposed Select-Service Hotel Foster City SOUTHWEST CORNER OF METRO CENTER BOULEVARD & SHELL BOULEVARD FOSTER CITY, CALIFORNIA SUBMITTED TO:PR OPOSED PREPARED BY: Mr. Lance Sorensen HVS Consulting & Valuation MPQ Foster City Metro Center LLC Division of TS Worldwide, LLC 1710 S Amphett Boulevard, Suite 350 100 Bush Street, Suite 1625 San Mateo, California, 94402 San Francisco, California, 94104 650-781-8888 +1 (310) 755-8293 March-2018 March 22, 2018 Mr. Lance Sorensen MPQ Foster City Metro Center LLC 1710 S Amphett Boulevard, Suite 350 San Mateo, California, 94402 HVS SAN FRANCISCO Re: Proposed Select-Service Hotel Foster City 100 Bush Street, Suite 1625 Foster City, California San Francisco, California, 94104 HVS Reference: 2018020120 +1 (310) 755-8293 +1 (415) 896-0516 FAX www.hvs.com Dear Mr. Sorensen: Pursuant to your request, we herewith submit our summary of findings pertaining to the above-captioned property. We have inspected the real estate and analyzed the hotel market conditions in the Foster City area. We have studied the proposed project, and the summary results of our fieldwork and analysis are presented in this document. We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Sincerely, TS Worldwide, LLC John Berean, Senior Project Manager [email protected], +1 (281) 381-3456 Li Chen, MAI, Vice President [email protected], +1 (310) 755-8293 Superior results through unrivaled hospitality intelligence. Everywhere. Table of Contents SECTION TITLE PAGE 1. Executive Summary 1 Subject of the Study 1 Ownership, Franchise, and Management Assumptions 3 Overview of Local Area Economy 3 Overview of Local Area Lodging Market Trends 7 Forecast of the Proposed Subject Hotel’s Occupancy 18 Forecast of the Proposed Subject Hotel’s Average Rate 19 Method of Study 20 2. Statement of Assumptions and Limiting Conditions 22 Addenda Qualifications 1. Executive Summary Subject of the The subject of the study is a 59,327-square-foot (1.36-acre) parcel to be improved Study with a select-service lodging facility; the hotel is anticipated to be affiliated with an upscale brand. The property, which is anticipated to open on January 1, 2022, will feature 120 rooms, a lobby lounge and café, a fitness room, a business center, a market pantry, and a guest laundry area. The hotel will also contain the appropriate parking capacity and all necessary back-of-the-house space. The subject site’s location is Southwest Corner of Metro Center Boulevard & Shell Boulevard, Foster City, California, 94404. LOCATION MAP March-2018 Executive Summary Proposed Select-Service Hotel Foster City – Foster City, California 1 VIEW OF SUBJECT SITE AERIAL PHOTOGRAPH March-2018 Executive Summary Proposed Select-Service Hotel Foster City – Foster City, California 2 We have assumed that all utilities will be available to the site and that no hazards are present that will impede its development. We assume that the certificate of occupancy will be issued on or before this date for the entirety of the improvements. Ownership, Franchise, The developer of the proposed subject hotel is MPQ Foster City Metro Center LLC, and Management which is based in Foster City. The subject site was last sold in 2017; MPQ Foster Assumptions City Metro Center LLC has owned the site since that time, having purchased it from Visa International Service Association for a reported price of $7,000,000. No other transactions have reportedly occurred within the last three years. The site is neither listed nor under contract for sale, and we have no knowledge of any recent listings. Details pertaining to management terms were not yet determined at the time of this report; however, we assume that the proposed hotel will be managed by a professional hotel-operating company, with fees deducted at rates consistent with current market standards. We recommend that the proposed subject hotel operate as an upscale, select- service hotel. While we have placed heavy consideration on the Aloft and AC by Marriott brands, which are affiliated with Marriott International, a specific franchise affiliation and/or brand has yet to be finalized. Overview of Local Area Foster City is a planned city in San Mateo County. San Mateo County, which covers Economy a total land area of roughly 450 square miles, features numerous county parks, beaches, marinas, and other recreation areas. The economy of San Mateo County is substantially reliant on San Francisco International Airport, which accounts for a significant percentage of its lodging demand and overall employment. In addition, the bio- and high-tech industries, as well as shipping, contribute heavily to the San Mateo County economy. Firms in this county are pioneers in biotechnology pursuits, research and development, telecommunications, and software. By investing heavily in research and development, the county's technology firms and e-commerce companies have emerged as leaders in the pharmaceutical and computer software market. San Mateo County's economic health is also related to its location between two important cities and regions: San Francisco to the north and San Jose (Silicon Valley) to the south. San Francisco is also one of the top tourist destinations in the world, renowned for its steep rolling hills, eclectic mix of architecture, and famous landmarks, including the Golden Gate Bridge and Chinatown. Locally, the unemployment rate was 2.8% in 2016; for this same area in 2017, the most recent month’s unemployment rate was registered at 1.9%, versus 2.6% for the same month in 2016. March-2018 Executive Summary Proposed Select-Service Hotel Foster City – Foster City, California 3 The following bullet points highlight major demand generators for this market: • The San Francisco Bay Area is a major center for technology innovation. The famed Silicon Valley stretches south from San Francisco; major industry- leading companies such as Airbnb, Uber, Salesforce, Dropbox, Twitter, Google, Facebook, and Apple are headquartered in the Bay Area. Furthermore, many start-ups are founded in the Bay Area, receiving funding from many venture- capital companies from around the country. San Mateo County is home to a large concentration of technology expertise, and its many high-technology engineering, computer, and microprocessor companies have led the area to be known as an extension of the greater Silicon Valley market. According to the 2016 Silicon Valley Index, Silicon Valley's economy has led the nation with extraordinary growth in jobs, income, innovation, and venture capital investment. Employers in San Mateo County added approximately 7,300 jobs in 2016; this job growth was driven by computer hardware design, information services, community infrastructure, health care, construction, and other business services. In Foster City, technology has been a prominent economic driver, with major employers including Visa Inc., IBM Corporation, and Gilead Sciences. Other major technology firms in the greater San Mateo County area include Box, Oracle, Evernote, Wealthfront, and Electronic Arts. • The education sector is a major component of the area's economy, with three institutions of higher education noted in the list of ten largest employers. The University of California (UC) is a public university system in California that comprises eleven campuses. The University of California has a combined student body of more than 238,000 students, over 1,700,000 living alumni, and a combined system-wide and campus endowment of nearly $17 billion. Moreover, Stanford University remains a major pillar of the education sector in the greater San Francisco area. The University features seven schools, over 16,000 students, and an endowment of almost $21.5 billion. Stanford is known for its biotechnology research and has very close ties with Silicon Valley. • Healthcare represents an economic force in the area. Kaiser Permanente, which is based in nearby Oakland, is an integrated managed-care organization that is a consortium of three distinct groups of entities: the Kaiser Foundation Health Plan, Inc. and its regional operating organizations, Kaiser Foundation Hospitals, and the Permanente Medical Groups. Kaiser Permanente is the largest managed-care organization in the U.S. In March 2016, Kaiser Permanente opened a 220,000-square-foot medical office in San Francisco’s Mission Bay district. The $200-million development, employing almost 500 people, can serve roughly 79,000 patients. Additionally, the UC San Francisco (UCSF) Medical Center is consistently ranked among the top ten hospitals in the United States by U.S. News & World Report. The $1.5-billion, 289-bed, state- of-the art UCSF Medical Center at Mission Bay opened in February 2015. March-2018 Executive Summary Proposed Select-Service Hotel Foster City – Foster City, California 4 Moreover, the Stanford University Medical Center is undergoing substantial renovations and expansion. Approximately $5 billion is being spent to modernize and expand several hospitals, including Hoover Pavilion, the School of Medicine, Stanford Hospital & Clinics, and the Lucile Packard Children's Hospital. The 521,000-square-foot addition to Lucile Packard Children's Hospital opened in December 2017, while the 824,000-square-foot Stanford Health Care facility is anticipated to open in early 2018. • San Mateo County, just south of San Francisco, features a high concentration of bio- and high-tech companies, many of which have satellite offices in San Francisco. Gilead Sciences, headquartered in Foster City, is in the process of expanding its 72-acre campus. Two office buildings, totaling roughly 590,000 square feet, are currently under construction and are anticipated to open in 2018/19. The Genentech campus, located in South San Francisco, comprises over 2.8 million square feet of office, laboratory, and manufacturing space on 124 acres. The company, which is owned by Roche, opened a new, 255,199- square-foot office building in May 2015.