Argosy Invests in Larkspur Mill Valley Hotel

On August 24, 2012, Argosy Real Estate acquired a controlling equity interest in the Larkspur Mill Valley Hotel, a 100-key limited service hotel. The hotel is located along Highway 101 in the Mill Valley community of Marin County, CA, five miles from the northern terminus of the Golden Gate Bridge and 11 miles from downtown San Francisco. Argosy has partnered with Ultima Hospitality, an experienced hotel management group headquartered in Chicago. Ultima owns and operates hotel properties across the country and is a minority co-investor in Larkspur. Senior debt financing was provided by Natixis.

Argosy and Ultima have negotiated a franchise agreement with Intercontinental Hotels Group (“IHG”) to re-brand the hotel as a Holiday Inn Express, following
execution of a limited property improvement plan (“PIP”) to implement brand-standard design elements. The previous ownership of the hotel completed an extensive renovation in 2010, leaving the property in excellent physical condition. The property operated as a Holiday Inn Express until 2009 before being re-branded under the boutique Larkspur brand by prior ownership. The hotel historically performed well as a Holiday Inn Express, with strong occupancy and rate performance compared to its competitive set. Weak performance of the property under the Larkspur brand made it possible for the partnership to acquire the hotel at a favorable cost basis and to create value through conversion of the asset back to the Holiday Inn Express brand. Larkspur’s performance is driven by robust leisure demand associated with the word-class tourist attractions of Marin County and the greater northern Bay Area, as well as overflow business and leisure demand from downtown San Francisco.

Marin County is both extremely anti-growth and nearly built-out in southern Marin County where the property is located, severely impairing the market’s ability to create new supply despite strong demand characteristics. The project boasts an excellent location at the junction of Highway 101, the main north-south artery through Marin County and into San Francisco, and Highway 1, which leads to tourist attractions along the Pacific Coast. Re-branding the property to a Holiday Inn Express flag will allow the hotel to leverage that brand’s strong distribution system, realizing improved occupancy and rate performance and regaining the hotel’s position at the lead of its competitive set.