Pebblebrook Hotel Trust is continuing to buy hotels in gateway U.S. cities. The real estate investment trust has acquired the 160-room Prescott Hotel in San Francisco (Union Square area), for $49 million. The property will continue to be managed by Kimpton Hotels & Restaurants.
"We're excited about our acquisition of the Prescott Hotel and our opportunity to further expand our already strong presence in the highly desirable San Francisco market," said Jon Bortz, chairman and CEO of Pebblebrook Hotel Trust.
Prescott is the REIT's sixth hotel investment in San Francisco, joining the recent additions of the Radisson Fisherman's Wharf, Hotel Palomar San Francisco and Hotel Milano.
The Prescott Hotel is located on Post Street just one block from Union Square. The hotel is comprised of two buildings, 545 Post Street, in which the company will own a fee simple interest consisting of 96 guestrooms (seven stories), and 555 Post Street, an adjacent attached building, in which the company will own a leasehold interest consisting of 64 guestrooms (located on floors three though seven). Pebblebrook's leasehold interest in the 555 Post Street building currently has 75 years remaining and expires in 2089.
In 2013, the Prescott Hotel operated at 88-percent occupancy, with an average daily rate of $206 and revenue per available room of $181. During the next 12 months, the company currently forecasts that the hotel will generate EBITDA of $3.2 to $3.8 million and net operating income after capital reserves of $2.7 to $3.3 million.
The hotel will also undergo a comprehensive renovation and repositioning of the hotel sometime between 2015 and 2016, including all guestrooms, bathrooms and public areas. The property's design will be overseen by Dawson Design Associates, the same design team that helped reposition the company's Hotel Zetta and that is helping reposition the Radisson Fisherman's Wharf.
"We are thrilled with the opportunity to creatively reposition the Prescott Hotel," noted Mr. Bortz. "We believe a renovated and repositioned product will be positively received in the vibrant Union Square market and the comprehensive nature of the repositioning will bring a new and unique guest experience to San Francisco—stay tuned."
Pebblebrook delivered a strong first quarter. It reported first-quarter funds from operations, or FFO, of $22.2 million, up from $15.5 million in the same period last year. Revenues also increased to $125.71 million from $104.91 million last year, beating analyst estimates.
Same-property RevPAR in the first quarter of 2014 increased 8.5 percent over the same period of 2013 to $168.98.
Looking ahead to the second quarter, the company has forecast adjusted FFO in a range of $0.49 to $0.53 per share.
“We’re very pleased with our portfolio’s strong operating performance in the first quarter, as revenue growth and profitability margin results exceeded both our outlook and the performance of the overall U.S. hotel industry,” Jon E. Bortz, chairman, president and CEO of Pebblebrook Hotel Trust, said at the time. “Our hotels continued to benefit from strong underlying hotel industry fundamentals. Industry demand significantly outpaced supply due to healthy increases in business transient, leisure and international inbound travel, as well as the first signs of meaningful improvement in group demand, all of which benefited our hotels, particularly those on the west coast."