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SAN FRANCISCO-Griffin Capital has acquired Hotel Palomar, a 195-room luxury boutique hotel located on the corner of Fourth and Market streets Downtown San Francisco. The Los Angeles-based investor says it paid a limited partnership that includes a Kimpton Hotels affiliate $36.3 million for the asset.

Hotel Palomar occupies the top five floors of an historic and architecturally significant building located in the South of Market neighborhood. Kimpton Hotels opened the hotel in 1999. The locally based company has signed a long-term agreement to continue managing the property for Griffin.

The acquisition is Griffin Capital’s first hotel purchase in the Bay Area, where it owns several office properties. “We are big believers in the current and future prospects for San Francisco,” says Griffin Capital chief investment officer Michael Escalante. “We feel the San Francisco economy is just now hitting its stride, and the local hotel market is entering a period of increasing strength, which will benefit well-managed, well-located properties like Hotel Palomar.”

The hotel is in close proximity to the Moscone Convention Center, the Yerba Buena museums and the Westfield San Francisco Centre, which recently underwent a $420-million renovation and expansion. The Barney’s flagship store is also nearby.

“We are bullish on the SOMA neighborhood,” says Escalante. “It’s an ideal place to own a luxury hotel.”

Hypo Real Estate Capital Corp. provided Griffin Capital a $27.2-million, 10-year fixed-rate first mortgage acquisition financing. Jones Lang LaSalle Hotels represented the seller and Hypo Real Estate Capital Corp.

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