SAN FRANCISCO-RLJ Lodging Trust has acquired the 150-room Vantaggio Suites Cosmo in San Francisco for a purchase price of $29.5 million or approximately $197,000 per key in an off-market transaction. The purchase price per-key represents a significant discount to replacement cost given the high barriers-to-entry in San Francisco. The company purchased this hotel with cash available on its balance sheet.

The hotel, which is located three blocks from Union Square, was constructed in 1930 and is listed on the National Register of Historic Places. Recently, the property primarily catered to short-term stay rentals. Upon acquisition, the company plans to close the unoccupied hotel for an extensive $13.0 million multi-phase conversion. It is anticipated that the renovation will be completed by the end of 2014 and the hotel will reopen at that time as a 150-room Courtyard by Marriott. The company expects that the total investment, including capital expenditures, will represent a forward capitalization rate of approximately 7.8% based on the hotel's projected 2015 net operating income.

“The acquisition of this hotel at such an attractive price exemplifies our investment strategy of sourcing off-market premium focused-service hotels in high-density, urban markets,” commented Thomas Baltimore, president and CEO. “We expect that our proven track record with complex brand conversions will yield strong returns for our shareholders.”

The San Francisco Travel Association reported that in 2012 there were 16.5 million visitors to the city and estimated that these visitors spent almost $9 billion, the highest spending level ever recorded.

The hotel's urban location provides it access to a wide variety of leisure and corporate demand generators. It is only blocks away from one of San Francisco's most visited attractions, Union Square, world-renowned for its shopping, restaurant, hotel, and entertainment offerings. San Francisco's famed cable car system is also only blocks away from the hotel with access to other major tourist destinations such as Fisherman's Wharf and Alcatraz.

With the repositioning of the property to a premium select-service brand and the projected continuance of strong visitor demand to the market, the company expects that this hotel has significant upside and is well positioned to outperform in this dynamic growing market.

Instant Insights /

RLJ Lodging Acquires Vantiaggio Suites San Francisco for Conversion

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