02/09/2011

Buyers Snap Up 2 More San Francisco Hotels

The upswing in San Francisco hotel sales that started late last year has gained momentum with two more deals.

Thayer Lodging has agreed to buy the leasehold interest in the 338-room JW Marriott in Union Square from Ashford Hospitality for slightly more than $100 million, or $300,000/room.

Meanwhile, Walnut Hill Group has agreed to buy the 221-room Best Western Tuscan Inn near Fisherman's Wharf from a joint venture led by Abacus Lodging Investors of Chicago. The price is undisclosed, but market players speculated that the Abacus team is fetching a premium to the $36.5 million it paid just one year ago.

The deals are the latest in a string of high-profile sales that have helped establish pricing benchmarks in San Francisco and encouraged hotel owners to test the waters with listings.

Ashford, a Dallas REIT, acquired the JW Marriott in 2006 for $95 million and spent $22 million renovating and rebranding the property, which formerly was called the Pan Pacific. Ashford decided to sell the property, which has a recourse mortgage, as part of an effort to reduce its exposure to recourse debt, an Ashford executive said during a conference call with stock analysts in November after the company reported its third-quarter earnings.

The hotel, at 500 Post Street, has a ground lease that runs for about 70 years. Cushman & Wakefield's Sonnenblick Goldman unit is brokering the sale to Thayer, a fund operator in Annapolis, Md., that specializes in hotel investments. Thayer, which owns 15 hotels with 3,391 rooms, is part of a joint venture that last year acquired Interstate Hotels & Resorts of Arlington, Va.

The Abacus partnership acquired the Best Western Tuscan Inn, at 425 North Point Street, in January 2010 from Kimpton Hotels, which wanted to retire an expiring $30 million loan. Eastdil Secured is brokering the sale to Walnut Hill, a local investment firm.

In 2008 and 2009, just one large San Francisco hotel traded hands, according to Real Estate Alert's Deal Database, which tracks transactions of $25 million and up. But eight hotels sold for a total of $412 million in 2010, most late in the year.

The wave began in September when LaSalle Hotel Properties paid $68.5 million for the 201-room Hotel Monaco. That deal was quickly followed by sales of the 360-room Le Meridien ($142.9 million), the 252-room Argonaut Hotel ($84 million) and three foreclosed boutique hotels totaling 355 rooms ($40.5 million).

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