Driftwood Acquisitions & Development has expanded its unique hotel investment strategy to California, an uncharted state for the Coral Gables-based company
Led by father-son team Carlos Rodriguez Sr. and Carlos Rodriguez Jr., Driftwood bought the 353-room Marriott Mission Valley in a shopping and hotel district near San Diego’s former Qualcomm stadium for $85.7 million March 18. The deal breaks down to $242,776 per key.
It’s not that DAD wanted to invest in San Diego or California specifically. It’s more that this opportunity matched what DAD looks for in an investment and that the area, already doing well, is poised for growth, Carlos Rodriguez Sr. said.
“We don’t say that, ‘We need to be in San Diego, or we need to be in New York or Ocean Drive in Miami Beach.’ We are constantly looking across the nation. We have four persons whose job is 24/7 to be looking for opportunities for us to buy and enter into a market. So when we see it, we jump on it,” said the DAD chairman and CEO.
DAD plans to build a second hotel on the 7.4-acre site. The company is in talks with Marriott for the hospitality company to put its brand on a 150-room extended-stay hotel.
DAD has an uncommon investment strategy targeting hotels with positive cash flow and upside potential. After closing on the purchase, it syndicates 90 percent of its equity ownership to accredited investors. Eventually, its strategy calls for the sale of the hotels at a profit for all.
“We sell pieces of the investment as limited partners. We always retain control over the general partner, and we always retain 10% of the ownership,” Rodriguez Sr. said.
Most recently, DAD, which was founded in 2015, sold its first hotel that completed its investment cycle. On Dec. 26, an affiliate sold the 90-room SpringHill Suites in Central Florida’s Altamonte Springs for $11.65 million.
The company boasted the internal rate of return for this sale was more than the initially projected 16%. It bought the asset for $6.75 million in December 2015, meaning it held it for three years.
It likely will hold the The San Diego investment longer.
“This one is more of a long-term play because we see a lot of value-creation opportunity in this particular deal,” Rodriguez Sr. said.
DAD doesn’t plan to renovate the hotel but plans room upgrades and the additional hotel, which should be finished in late 2022.
The location also offers an upside with San Diego State University planning to redevelop the area that includes the SDCCU Stadium, where the San Diego Chargers played before moving to Los Angeles. The stadium is just over a mile drive from the Marriott hotel.
“That’s only a plus for the hotel. We understand it’s going to take years for them to redevelop the whole area,” Rodriguez Sr. said. “As that development progresses, it’s only going to be a positive impact to us and to the neighborhood.”
DAD is a sister company to Driftwood Hospitality Management LLC, a North Palm Beach-based hotel manager.
In the 1990s, Rodriguez Sr. moved to Miami and started his own hotel company, Cardel Hotels, and a management company, Cardel Hospitality Group. In 2003, he merged it with Driftwood Hospitality Management, where he still is executive vice president.
DAD was founded later with ties to DHM. DAD owns 25% of DHM, and DHM owns 12.5% of DAD, according to Rodriguez Jr. DHM manages DAD’s assets and has started managing the Marriott Mission Valley at 8757 Rio San Diego Drive.