Last summer, PB Capital Corp., which held the $44.3-million loan, took the hotel back when there were no bidders for the property. MonumentRealty, which acquired the hotel in 2004, had defaulted on the note.

Like the recapitalization of 1350 Eye St.--an office property inthe East End--the Watergate's sale is shedding very welcome light on pricing forhotels in the DC area, especially since trades in this asset class havebeen so rare.

"What this sale illustrates is that there is a lot of pent up demandfrom equity looking for the right opportunities," says Marc Magazine.Magazine represented PB Capital when he was with CB Richard Ellis. Hehas since left. But this month he opened the doors on a new firm--McLean, VA-based Humboldt Hospitality Advisors--that he formed with colleagues Tom Baker and Dave Durbin. Forty-five million dollars, he tells GlobeSt.com, is a good price fora closed property that needs a full renovation. Magazine estimatesthat the new owner has at least $50 million in renovations ahead.

The closing sets the tone for what Magazine says will be more hotelssales in the DC area. There are several hotel assets coming onto the market, he says, withthree well-located, limited-service hotels coming online within thenext 30 days. "I believe these will be sold at aggressive cap rates," says Magazine, whopoints to LaSalle Hotel Properties' $95-million acquisition of Sofitel Lafayette Square earlier this year as very important for the market. "I give LaSalle high marks for taking the first leap," says Magazine. "Everyone had been sitting back to see how far prices would tumble until LaSallestepped up."

Still, it is clear that valuations have tumbled from pre-crash pricing and many loans will need to be restructured. That is the space in which Humboldt will play, Magazine relates. "Our plan is to inject capital into restructuring existing debt and/or to finance neededrenovations to keep up with industry standards." The company has identified an aggregate of $300 million to $400 million in equity sources interested in partnering in deals, he says."We could tap as little as $5 million from individual investors to as much as $200 million."