LA's Sunset Tower Hotel could be target of foreign capital

(The Sunset Tower Hotel Los Angeles is reportedly for sale.)

There is no shortage of foreign capital searching for quality assets in gateway markets. Look no further than the Sunset Tower Hotel, in Los Angeles, which is reportedly on the market now and could fetch up to $100 million.

The hotel, known to attract Hollywood's glitterati, is being sold by hotelier Jeff Klein and majority owner ER Hollywood. It is being marketed by JLL. If the hotel does find a buyer willing to shell out for the asking price, it would be quite an achievement for ownership. With only 81 keys, selling the hotel for $100 million would be $1.2 million per room. Not too bad when you consider that Klein and partner Peter Krulewitch bought the property in 2004 for just $18.5 million.

According to The New York Post and verified by Real Capital Analytics, Krulewitch sold an 80-percent stake in the hotel in 2015 for $75 million to ER Hollywood, owned by Thai mogul Thosapong Jaruthavee. Klein retained his 20-percent stake, but there are rumblings, according to a source who spoke to the Post, that “ER Hollywood has the right to offer Klein’s 20-percent share as well. But he could stay in if he and the buyer agreed.”

There has been no shortage of foreign money seeking out quality hotel assets in major U.S. cities. Especially money from Asia, with China taking the lead, but other institutional players from Korea, Singapore and Japan also joining the fray.

Last September, Anbang acquired the Strategic Hotels & Resorts portfolio, which included three hotels in the Los Angeles area—Loews Santa Monica,Ritz-Carlton Laguna Niguel and Montage Laguna Beach—from Blackstone Group. 

As far back as 2014, China's Shanghai Yudu Group purchased the Los Angeles Airport Marriott for $160 million, a sale which at the time was the largest of the year in Los Angeles County. 

Los Angeles' hotel fundamentals have been exemplary of late. L.A. County’s average occupancy rate for 2016 reached 81.3 percent, the highest in the county's history. A record 29.2 million hotel room nights were sold countywide with ADR reaching a new high of $171.95, an increase of 8.6 percent over 2015. L.A. County also led the U.S. in RevPAR growth at nearly 11 percent.