GLOBAL - AREA Property Partners has closed on its first hotel purchases of the year with the acquisition of three Chicago area properties for $51m (€38.6m).

The properties include the 316-room Hyatt Lisle near downtown Naperville, the 301-room Hyatt Deerfield in the North Shore area of Chicago and the 206-room Hyatt Rosemont near the O'Hare International Airport. 

John Jacobsson, partner with AREA, said: "We have seen the improvement in the hotel market as the year has gone on. According to a report from Smith Travel Research, there are now meaningful increases in occupancy and some real growth in room rates in some markets around the country."

AREA, which made the purchase through an all-cash transaction, is planning to spend $13.5m above the purchase price on improvements.

It bought the properties in a joint venture with Aimbridge Hospitality, which will operate them under the Hyatt brand.

AREA used capital from AREA Value Enhancement Fund VII to buy the hotels. The real estate manager finished the capital raise for the commingled fund in 2008. Total equity commitments reached $757m.

One of the investors in the commingled fund was the Pennsylvania Public School Employees Retirement System, which approved a commitment of no more than 25% of total capital commitments, with a cap of $150m.

This commitment was approved in December of 2007. At that time, investors in the fund were projecting a gross internal rate of return of 15-18%.

When the fund was formed, the company was known as Apollo Real Estate Advisors - it later became AREA.

AREA looks to invest in properties for Fund VII that are in major urban markets in the US, including Chicago and the east and west coasts.

Jacobsson said: "We are in the middle innings as far as placing the capital for Fund VII in the market."

The commingled fund looks to buy a combination of apartments, retail, office, industrial and hotels.