04/17/2013

Blackstone Lands Hyatt Regency in Honolulu

In what could be the largest hotel trade of the year, Blackstone has agreed to pay about $450 million for the leasehold interest in the Hyatt Regency Waikiki Beach in Honolulu.

Blackstone’s price for the 1,230-room hotel works out to $366,000/room. The New York fund shop is expected to plow an additional $75 million into a renovation. The upper-upscale property will retain the Hyatt flag and continue to be managed by Hyatt Corp. of Chicago.

Eastdil Secured is advising the seller, a joint venture between Goldman Sachs’ Whitehall Street Real Estate fund operation and Hyatt.

Another Waikiki Beach hotel is also under contract. A Highgate Hotels partnership has agreed to pay $127 million for the 401-room Courtyard Waikiki Beach. Eastdil is brokering that sale for a joint venture that includes fund shop Rockpoint Group of Boston.

The deals show there is a pulse in the sales market for Hawaiian hotels. Although performance has rebounded after plunging during the recession, when tourism dried up, sales have been limited. Just three large properties traded in 2011 and only one last year, according to Real Estate Alert’s Deal Database, which tracks sales of $25 million or more. But a couple of current offerings are attracting substantial interest from investors.

The Hyatt Regency encompasses two high-rise buildings at 2424 Kalakaua Avenue, across the street from Waikiki Beach. The resort, which opened in 1974, includes a spa, pools, a gym, restaurants and bars.

The property is performing in line with comparable upper-upscale hotels in the Waikiki market. Such hotels were 89.6% occupied on average last year, up from 84.6% in 2011, according to Smith Travel Research. Room rates averaged $218.17, up 10%. That pushed revenue up a whopping 16.5%, to $195.45/room.

Whitehall and Hyatt teamed up to buy the hotel out of bankruptcy in 2008 for $410 million. The former owner, Japanese property firm Azabu Buildings, had filed for bankruptcy in 2006. Whitehall holds a 92% interest in the joint venture, while Hyatt holds the remaining stake.

The sale, if completed, would rank as the nation’s second-highest price paid for a single hotel since the market downturn, after the $570 million sale of the Manchester Grand Hyatt San Diego in 2011.

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