REIT buys two hotels at CityPlace for $39 million.

Byline: Matt M. Johnson

A Canadian real estate investment trust specializing in hotels has made its first foray into Minnesota by spending about $39 million in cash to buy two new Woodbury properties.

Vancouver, British Columbia-based American Hotel Income Properties paid $20.6 million for a 116-room Residence Inn by Marriott at 205 Radio Drive, and $18.7 million for 120-room Courtyard by Marriott next door at 185 Radio Drive, according to certificates of real estate value made public on Thursday. The two properties are in the southeast quadrant of Interstate 94 and Radio Drive.

The seller is Fargo-based TMI Hospitality, which developed both of the four-story hotels as part of Woodbury's CityPlace redevelopment. The Residence Inn opened in 2016 and the Courtyard opened in 2017, according to CoStar.

The Residence Inn deal, which closed on Dec. 3., works out to $177,676 per room. Washington County values the property at $8.4 million for property tax purposes. The property cost $7.5 million to build, according to building permits filed with the county.

American Hotel closed on the Courtyard hotel on the same day, paying $156,176 per room. TMI paid $2.9 million for the property in 2016. The county values the hotel at $8.4 million. The construction cost of the hotel was $9.4 million.

The Woodbury hotels are part of a 12-property, $191 million portfolio deal between American Hotel and TMI. American Hotel acquires a total of 1,203 hotel rooms in the transaction. The other hotels in the portfolio are in Texas, Michigan, Pennsylvania and North Dakota, according to an American Hotel press release. The acquisition works out to an average of $158,000 per room, which is below replacement cost for the hotels, the company said.

The purchase came shortly after American Hotel sold off 45 hotels in an "Economy Lodging" portfolio for $215.5 million to an affiliate of Denver-based Vukota Capital Management.

The two deals put American Hotel in a better cash flow...