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    Hotel Boom Erupts In Natomas

Mark Anderson, Staff Writer
From the November 22, 2002 print edition Sacramento Business Journal

Alleghany Properties Inc. is preparing part of its large land holdings in North Natomas for three new hotels between Arco Arena and the airport.

The hotels, which would be major franchises of 100 to 150 rooms apiece, would be built by Capitol Avenue Development & Investments of West Sacramento.

Capitol Avenue Development is doing groundwork on the project now for an unnamed investment group, said Dave Bugatto, president of Sacramento-based Alleghany. The investment group owns and operates local hotels.

Meanwhile, other development teams are looking at building four other hotels on sites from South Natomas to the airport. The potential projects include a 100-room hotel at Gateway Oaks Drive in South Natomas, a 90-room hotel on Del Paso Road near El Centro Road, a 100-room hotel at El Centro Avenue and Interstate 80, and a long-planned hotel project at Sacramento International Airport.

The interest in Natomas is based on the area's stunning growth, plus the resilient local hotel market.

"Sacramento is one of the few markets equity investors are still considering for investing. No one is looking for anything in the Bay Area," said Kimo Bertram, hotel analyst with PKF Consulting in San Francisco.

"There is a lot of interest in Natomas now," he said. "Right now it's preliminary interest, but there could be a lot of activity."

The Capitol Avenue Development hotels could be among the first developments in Natomas Crossing, a two-mile, 215-acre strip of freeway frontage on the east side of Interstate 5 from Interstate 80 to Del Paso Road.

The hotels are planned on 9 acres at the northwest corner of the property. Construction of roads, curbs and gutters for the parcel will start in January.

Why they're interested: The new hotels would get business from downtown, the airport and the fast-growing areas of Natomas.

Zoning for offices and industrial buildings stretches down Del Paso Road. The Alleghany land itself is zoned for more than 3 million square feet of office space, plus housing, restaurants and stores.

The long-term community plan for North Natomas predicts the 9,000-acre area, four-fifths of which sits inside the city of Sacramento, will eventually have 33,000 homes, 72,000 workers, and up to 66,000 residents. The plan includes 2,194 acres for offices and retail.

The area between downtown and Sacramento International has long been home to successful hotels. The eight properties around Richards Boulevard do well consistently. The two Marriott Hotels Corp.-franchised properties in South Natomas have racked up high occupancy and rate numbers for a decade, and the Hilton Garden Inn that opened four years ago in South Natomas does strong business.

Bugatto said the three new hotels at Del Paso would be the closest rooms to the airport outside of the airport hotel, which is solidly booked.

He added, "The market potential out there is amazing."

Sacramento bucks the trend: Hotel rates in Sacramento rose 2.2 percent for the first nine months of 2002 from the previous year. Sacramento and Napa are the only regions in Northern California where rates rose this year, according to figures supplied by PKF Consulting.

Sacramento's average room rate for the first three quarters rose from $90.49 to $92.53. But the rates in Northern California as a whole were down 13 percent, from $148.45 to $129.23.

Every other Northern California market saw rates fall. The San Francisco airport area saw the biggest plunge, with average rates down 24 percent, from $136.64 to $104.19. Downtown San Francisco average rates slipped 16 percent.

Rates in the San Jose/Peninsula market were down 20.1 percent. Oakland/ East Bay average rates slid 8.6 percent.

Occupancy, too, was down almost across the board through September.

But occupancy in Sacramento, among the highest in Northern California at 71.1 percent, was up 0.4 percent from a year earlier.

2002 American City Business Journals Inc


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