Development

Radisson Hotel Fisherman’s Wharf and Retail Sold for $132.0 Million

The 355-room hotel, which includes approximately 44,000 square feet of street retail space, is located in the heart of Fisherman’s Wharf in San Francisco, CA.

Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE:PEB) announced that it has acquired the Radisson Hotel Fisherman’s Wharf and Retail for $132.0 million. The 355-room hotel, which includes approximately 44,000 square feet of street retail space, is located in the heart of Fisherman’s Wharf in San Francisco, CA. The property will be managed by Davidson Hotels & Resorts .

Radisson Hotel Fisherman’s Wharf “We’re very pleased with our acquisition of the Radisson Hotel Fisherman’s Wharf and Retail, located in one of San Francisco’s strongest submarkets,” said Jon Bortz, Chairman and Chief Executive Officer of Pebblebrook Hotel Trust. “This hotel benefits from an excellent location in the heart of Fisherman's Wharf, which is reflected in the hotel's consistently high occupancy levels and strong cash flows. The property’s diversity of income streams, including the revenue from 44,000 square feet of premier ground level retail space, coupled with a significant repositioning opportunity, makes the Radisson Hotel Fisherman’s Wharf and Retail another terrific addition to our expanding portfolio.”

The Radisson Hotel Fisherman’s Wharf and Retail occupies an entire block of San Francisco’s Fisherman’s Wharf, bordered by Jefferson, Mason, Beach and Powell Streets, across the street from Pier 39. Situated on the San Francisco Bay, the hotel offers outstanding views of the Golden Gate Bridge and Alcatraz and is immediately adjacent to the Ferry terminals serving popular tourist destinations around the Bay. Just blocks from famous landmarks, including San Francisco’s Aquarium of the Bay, Ghirardelli Square and the Powell Street cable car turnaround, the hotel is also a short distance from North Beach, the Financial District and Moscone Center, California’s largest convention center and exhibit hall. San Francisco consistently ranks among the top tourist destinations in the world and serves as a West Coast hub for tourism, technology, banking and financial services. The hotel’s immediate area along Jefferson Street is currently undergoing a $4.0 million beautification project, creating a pedestrian-friendly, outdoor plaza experience directly in front of the property, improving the experience for the over 25,000 people who visit the area each day.

Originally built in 1964 as a 250-room hotel with 14,000 square feet of retail space, the hotel expanded in 1999 with the construction of an additional 105 rooms and 30,000 square feet of retail space. The hotel was updated by a comprehensive $4.5 million renovation in 2012, offering contemporary guest rooms and a refreshed lobby. The hotel also features 1,720 square feet of meeting space and a newly renovated fitness center. The hotel’s guest rooms offer remodeled bathrooms, new Sleep Number beds, 37-inch flat-screen TVs, upgraded lighting and contemporary décor.

The property includes 44,000 square feet of ground level retail space, offering unparalleled visibility and extensive street frontage along Jefferson Street, the primary thoroughfare of Fisherman’s Wharf, as well as 235 parking spaces, benefitting from a high-demand location driven by the property’s proximity to numerous tourist attractions. The retail space consists of twenty units, including food, convenience and tourist-focused retail and service providers.

In 2013, the Radisson Hotel Fisherman’s Wharf is forecasted to operate at 89 percent occupancy, with an average daily rate (“ADR”) of $184, room revenue per available room (“RevPAR”) of $165, earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $11.9 million and net operating income after capital reserves (“NOI”) of $11.0 million. The property’s retail space is currently 95 percent leased with an average rent per square foot over $100. In 2014, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $10.2 to $10.7 million and net operating income after capital reserves (“NOI”) of $9.3 to $9.8 million. The Company’s 2014 forecasted financial performance for the property includes the negative impacts of Prop 13 property tax reassessment increases, insurance increases and a negative impact in the fourth quarter from a planned renovation of the hotel.

The company will own a leasehold interest in the property through a ground lease, which currently has 48 years remaining and expires in 2062.

The Company plans to invest $18.0 to $20.0 million between 2014 and 2015 in a complete renovation and repositioning of the hotel, including all guest rooms and public areas, both interior and exterior. The property’s design will be overseen by Dawson Design Associates, the same design team that repositioned the Company’s Hotel Zetta, also in San Francisco, CA. The hotel’s comprehensive guest room and public area improvements are expected to commence in the fourth quarter of 2014 and the Company plans to rename the property upon completion of the renovation.

“We are very excited about the opportunity to reposition the Radisson Hotel Fisherman’s Wharf to an upper upscale boutique hotel,” noted Mr. Bortz. “We believe this type of product will be positively received in the vibrant Fisherman’s Wharf market and the comprehensive renovation and repositioning plan that will touch all aspects of the hotel will provide a new and unique guest experience.”

In conjunction with the Company’s acquisition of the Radisson Hotel Fisherman’s Wharf and Retail, the Company has selected Davidson as manager for the hotel. Davidson also manages the Company’s DoubleTree by Hilton Bethesda – Washington, DC.

“We are eager to expand our successful relationship with Davidson Hotels & Resorts,” continued Mr. Bortz. “The acquisition of the Radisson Hotel Fisherman’s Wharf and the selection of Davidson as manager of the hotel mark our second Davidson-managed hotel, and we look forward to incorporating their operational expertise at the Radisson Hotel Fisherman’s Wharf.”

“We are thrilled to further our relationship with Pebblebrook Hotel Trust and to bring our extensive experience to the Radisson Hotel Fisherman’s Wharf,” said Davidson’s President and Chief Executive Officer John Belden. “We look forward to expanding our portfolio further into the San Francisco market, as we envision abundant opportunities to be unlocked at this hotel.”

The Company expects to incur approximately $2.1 million of costs related to the acquisition of the hotel and $1.0 million of costs related to the transition of a new management team that will be expensed as incurred.

The acquisition of the Radisson Hotel Fisherman’s Wharf and Retail brings the total number of properties in the Company’s portfolio to 29, marks the Company’s fifth investment in San Francisco, California and represents the Company’s second investment in Fisherman’s Wharf.

Pebblebrook Hotel Trust is a publicly traded real estate investment trust (“REIT”) organized to opportunistically acquire and invest primarily in upper upscale, full-service hotels located in urban markets in major gateway cities. The Company owns 29 hotels, including 23 wholly owned hotels with a total of 5,546 guest rooms and a 49% joint venture interest in six hotels with a total of 1,775 guest rooms. 

 
Pebblebrook Hotel Trust
Historical Operating Data - Entire Portfolio
($ in millions, except ADR and RevPAR)
(Unaudited)
         
 
Historical Operating Data:
First Quarter Second Quarter Third Quarter Fourth Quarter Full Year
2012 2012 2012 2012 2012
 
Pro forma Occupancy 75% 85% 87% 80% 82%
Pro forma ADR $191 $213 $217 $217 $210
Pro forma RevPAR $143 $180 $189 $172 $171
 
Pro forma Hotel Revenues $124.3 $151.6 $156.2 $148.4 $580.4
Pro forma Hotel EBITDA $25.3 $46.8 $50.6 $42.3 $165.0
 
First Quarter Second Quarter Third Quarter
2013 2013 2013
 
Pro forma Occupancy 79% 86% 87%
Pro forma ADR $197 $223 $231
Pro forma RevPAR $156 $193 $202
 
Pro forma Hotel Revenues $132.4 $160.7 $164.3
Pro forma Hotel EBITDA $28.9 $51.2 $53.2

 

These historical hotel operating results include information for all of the hotels the Company owned as of December 10, 2013, except for the operating results of Hotel Zetta (formerly Hotel Milano) for the first quarter of 2012. The hotel operating results for the Manhattan Collection only includes 49% of the results for the 6 properties to reflect the Company's 49% ownership interest in the hotels. These historical operating results include periods prior to the Company's ownership of the hotels. The information above does not reflect the Company's corporate general and administrative expense, interest expense, property acquisition costs, depreciation and amortization, taxes and other expenses. Any differences are a result of rounding.

The information above has not been audited and has been presented only for comparison purposes.



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