SAN FRANCISCO-Strategic Hotels & Resorts Inc. has closed on the Westin St. Francis hotel on Union Square. The Chicago-based REIT paid $440 million for the 1,195-room historic property. The seller was an affiliate of the New York-based investment bank Blackstone Group that acquired the hotel in 2000 for $243 million. Westin, an affiliate of Starwood, will continue to manage the property for Strategic Hotels & Resorts.

The hotel features 45 luxury suites, 50,000 sf of meeting space, 39,000 sf of retail space, a 4,600-sf health club and spa and four food and beverage outlets. Strategic Hotels forecasts that the property will contribute between $19 million and $21 million of EBITDA in the last seven months of 2006 and between $32 million and $34 million in the first 12 months of ownership.

Strategic Hotels & Resorts owns and asset manages 18 high-end hotels and resorts. At the time Strategic Hotels put the property under contract, chief executive Laurence Geller said San Francisco has lagged the broader market recovery and is poised for significant and sustainable growth. In addition, CFO James Mead told that significant value can be added through the conversion and realignment of the retailing space, guestrooms and public areas.

The hotel and much of the retail space fronts Union Square, a tourist Mecca that is home to the city’s high-end retail shops. “There is a belief that we can make more money out of the same retail space,” Mead said. With regard to the hotel’s common areas and guestrooms, he said the general plan is to “add to some of the recent renovations and refine and tune the marketing strategy and the pricing potential for the asset.”

Several San Francisco hotels have changed hands in recent weeks and months. In early May, The 360-room Park Hyatt hotel in the Financial District was acquired by a new fund of HEI Hospitality of Norwalk, CT, for about $126 million and re-branded a Le Meridien. The seller was a a subsidiary of Strategic Hotel Capital LLC, a private company whose principal shareholders are affiliates of Goldman, Sachs & Co. and investors advised by Prudential Real Estate Investors.

On April 20, Ashford Hospitality Trust of Dallas closed on its acquisition of the 338-room Pan Pacific San Francisco Hotel for $95-million, or $281,065 per key, and re-branded the property a JW Marriott hotel. That same week, Greystone Hospitality of San Francisco paid $15.25 million, or $246,000 per key for the 62-room Griffon Hotel, one of only three hotels located along the Embarcadero.

At the end of March, the Argent hotel on Third Street between Market and Mission was sold for $178 million or $258 per key. It may be converted to a Westin, according to local sources. Finally, the 110-room Campton Place Hotel, which sits on the Embarcadero near the Griffon Hotel, sold in November for $400,000 per key.

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