WASHINGTON, DC-There is something about San Francisco's hotel market that local REITs clearly like: for the second time in a month a local company has acquired a hotel asset in this California city. In this case, it was RLJ Lodging Trust, which is buying the 150-key Vantaggio Suites Cosmo for $29.5 million, or $197,000 per room. It was an off-market transaction.
The purchase price per key is a significant discount to replacement cost for the high barriers-to-entry market of San Francisco, RLJ Lodging said when it announced the transaction. The REIT purchased the hotel with cash available on its balance sheet. When the deal closes, it plans to close the unoccupied hotel and invest $13 million in a multi-phase conversion, which should deliver at the end of next year. The hotel will re-open as a 150-room Courtyard by Marriott. RLJ Lodging expects that the total investment will represent a forward capitalization rate of approximately 7.8% based on the hotel's projected 2015 net operating income.
RLJ follows a hotel acquisition Annapolis, MD-based Chesapeake Lodging Trust made last month, also in San Francisco. The REIT purchased the fee simple interest in the 313-room Hyatt Fisherman's Wharf from an affiliate of Hyatt Hotels Corp. for $103.5 million, or approximately $331,000 per key. The REIT already owned hotels in the city's Financial District and Union Square.
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