BETHESDA, MD—Pebblebrook Hotel continues to expand its footprint in San Francisco; its latest acquisition is of the Prescott Hotel for $49 million.
The 160-key hotel is located in the city’s Union Square. The company expects to incur $1.4 million of costs associated with the defeasance of an existing loan as part of the transaction. It will continue to be managed by Kimpton Hotels & Restaurants.
This is Pebblebrook’s sixth hotel investment in the city, according to a prepared statement by CEO Jon Bortz. “The property is central to San Francisco’s primary business demand drivers, including the Financial District, the Moscone Convention Center and the Union Square submarket,” he said, which has historically outperformed all other submarkets within San Francisco.
The Prescott Hotel consists of two attached buildings. One is located at 545 Post St. and the REIT will own a fee simple interest in the 96-key, seven story building. The other building is located at 555 Post St., and in that the REIT will own a leasehold interest consisting of 64 guest rooms that are located on floors three though seven. Pebblebrook’s leasehold interest at 555 Post currently has 75 years remaining and expires in 2089.
545 Post St. was built in 1913 as the Cecil Hotel and 555 Post St. was built in 1922 for the Union League Club. Both buildings were renovated and repositioned as The Prescott Hotel in 1989.
Last year the hotel operated at 88% occupancy, with an average daily rate of $206 and room revenue per available room of $181. Pebblebrook forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization of $3.2 to $3.8 million and net operating income after capital reserves of $2.7 to $3.3 million over the next twelve months.
Pebblebrook is planning another renovation and repositioning of the hotel between 2015 and 2016. Dawson Design Assoc. will oversee the design.
With this deal the REIT’s portfolio, or at least the revenues from its portfolio, are solidly based out of the West Coast, despite its East Coast roots. In its latest quarterly earnings the REIT noted that more than 60% of its portfolio EBITDA comes from properties on the West Coast, and its RevPAR growth of 13.1% from hotels out West overwhelmed the 1.9% RevPAR growth from the East Coast properties.
“This general outperformance in West Coast markets should not only continue for the rest of the year, but it should continue for at least the next several years, at least as we see it today,” Bortz said in the company’s earnings call last month.