Thayer Lodging pays $161M for The Ritz-Carlton, San Francisco

1 Jul, 2013 By: David Eisen

Thayer Lodging Group has bought the 338-room Ritz-Carlton, San Francisco for $161 million from Host Hotels and Resorts. The acquisition is the first investment of Thayer Fund VI. Thayer intends to invest up to $17 million in the property in its first two years months of ownership, the company said.

Lee Pillsbury, co-chairman and CEO of Thayer Lodging Group, said, "We are bullish on the San Francisco market, and bullish on the environment for investing in hotel real estate. We look forward to making additional announcements in the weeks ahead."

For its part, Host intends to use the proceeds from the sale toward future acquisitions and for other purposes, the real estate investment said. Host's CFO, Gregory Larson, said the move brings the REIT's total dispositions since the start of last year to more than $600 million. Recently, Host acquired the Hyatt Place Waikiki Beach for $138.5 million. "As we have done in the past, we will, from time to time, make opportunistic sales of what we consider to be core assets in target markets for the right price," Larson said.  

Thayer also owns the J.W. Marriott San Francisco, which it acquired in 2011. The company said the property's net operating income has tripled since then.

Of the Ritz-Carlton transaction, Fred Malek, Thayer Lodging chairman, added, "With this transaction, we hope to replicate the success of our Orlando Grand Lakes Ritz Carlton, one of our highest return investments."

Strong Bay Area Market
The San Francisco market, with its high barriers of entry, has and continues to be attractive to investors. Last week, RLJ Lodging acquired the 150-room Vantaggio Suites Cosmo for $29.5 million, or approximately $197,000 per key, with the intention to convert it to a Courtyard by Marriott.

Word is The St. Regis San Francisco is also for sale by Starwood Hotels and Resorts for $140 million. The hotel has 260 rooms, including 46 suites, and 15,000 square feet of meeting space. The price that Starwood is asking for is in the range of more than $530,000 per key.

In 2011, the San Francisco Mandarin Oriental sold for $390,000 per key and the Fairmont, last year, sold for $325,000 per room.

Since 2010, transaction value has hit approximately $2.8 billion in the Bay Area. The majority of transactions in San Francisco have been led by REITs, followed by pension fund advisors and offshore capital, which accounted for about 20 percent of buyers.

Other Bay Area transactions include The Clift, which was purchased by an affiliate of Hospitality Properties Trust for $120 million earlier this year; the Hotel Rex, acquired for $29 million, the Hotel Palomar for $58 million and Blackstone Group’s purchase of the Parc 55 Wyndham for $235 million.

Since forming its first private equity fund more than two decades ago, Thayer has completed 43 hotel investments with a total acquisition cost of approximately $2.5 billion. Thayer Fund VI is targeted as a $300-million fund.

Topic : San Francisco, Ritz-Carlton
External Source : The Wall Street Journal, Thayer Lodging

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