Pebblebrook Hotel Trust (NYSE:PEB) announced that it has acquired the Prescott Hotel for $49.0 million. The 160-room hotel is located in the heart of Union Square in San Francisco, California. The property will continue to be managed by Kimpton Hotels & Restaurants.
“We’re excited about our acquisition of the Prescott Hotel and our opportunity to further expand our already strong presence in the highly desirable San Francisco market,” said Jon Bortz, Chairman and Chief Executive Officer of Pebblebrook Hotel Trust. “Just one block west of Union Square, this hotel, which represents our sixth hotel investment in San Francisco, is attractively located in the city’s world-renowned shopping and entertainment district. The property is central to San Francisco’s primary business demand drivers, including the Financial District, the Moscone Convention Center and the Union Square submarket, which has historically outperformed all other submarkets within San Francisco due to its well-balanced, diversified mix of leisure, corporate, group and convention demand.”
The 160-room, upper upscale, full-service Prescott Hotel is located on Post Street just one block from Union Square, the city’s most popular retail and visitor attraction. This hotel is also just three blocks from the Company’s Sir Francis Drake Hotel, as well as just blocks away from the Moscone Convention Center, the world famous Powell & Market cable car turntable and the Westfield San Francisco Centre urban shopping mall. San Francisco consistently ranks among the top tourist destinations in the world and serves as a West Coast hub for tourism, technology, biomedical, life sciences, banking and financial services.
The Prescott Hotel is comprised of two buildings, 545 Post Street, in which the Company will own a fee simple interest consisting of 96 guest rooms (seven stories), and 555 Post Street, an adjacent attached building, in which the Company will own a leasehold interest consisting of 64 guest rooms (located on floors three though seven). The Company’s leasehold interest in the 555 Post Street building currently has 75 years remaining and expires in 2089.
545 Post Street was originally built in 1913 as the Cecil Hotel and 555 Post Street was originally built in 1922 for the Union League Club. Both buildings were renovated, repositioned and opened as The Prescott Hotel in 1989. The hotel’s 160 guest rooms feature high-speed wireless internet access, fully stocked honor bars, 37” LG flat screen televisions, upscale bath amenities and Kimpton signature leopard-print bathrobes. The hotel also includes 600 square feet of meeting space, a fitness center and offers valet parking.
In 2013, the Prescott Hotel operated at 88 percent occupancy, with an average daily rate (“ADR”) of $206 and room revenue per available room (“RevPAR”) of $181. During the next 12 months, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $3.2 to $3.8 million and net operating income after capital reserves (“NOI”) of $2.7 to $3.3 million.
The Company plans to undertake a comprehensive renovation and repositioning of the hotel sometime between 2015 and 2016, including all guest rooms, bathrooms and public areas. The property’s design will be overseen by Dawson Design Associates, the same design team that helped reposition the Company’s Hotel Zetta and that is helping reposition the Company’s Radisson Hotel Fisherman’s Wharf, both of which are also located in San Francisco, California. The full scope and timing of the renovation are not yet fully defined, but concept and design work will commence shortly.
“We are thrilled with the opportunity to creatively reposition the Prescott Hotel,” noted Mr. Bortz. “We believe a renovated and repositioned product will be positively received in the vibrant Union Square market and the comprehensive nature of the repositioning will bring a new and unique guest experience to San Francisco – stay tuned.”
The Prescott Hotel will continue to be managed by Kimpton, which has managed the Prescott Hotel since 1989. In addition to the Prescott Hotel, Kimpton also manages eight of the Company’s other hotels: Argonaut Hotel in Fisherman’s Wharf; Hotel Palomar in SOMA just off Market Street; Sir Francis Drake Hotel on Powell Street; Hotel Monaco Seattle and Hotel Vintage Seattle in downtown Seattle, Washington; Hotel Vintage Plaza Portland in downtown Portland, Oregon; Hotel Monaco Washington DC in downtown Washington, DC; and Grand Hotel Minneapolis in downtown Minneapolis, Minnesota.
“We’re pleased with the opportunity to expand our very successful relationship with Kimpton Hotels & Restaurants,” continued Mr. Bortz. “Their strong track record, market knowledge and extensive experience in operating high-quality boutique properties such as the Prescott Hotel gives us immense confidence in the future for this property.”
“We are delighted to be furthering our relationship with Pebblebrook Hotel Trust,” said Kimpton’s CEO and President, Mike Depatie. “Our successful relationship continues to grow, and we look forward to further collaborative successes.”
The Company expects to incur approximately $0.3 million of costs related to the acquisition of the hotel and $1.4 million of costs associated with the defeasance of an existing loan.
The acquisition of the Prescott Hotel brings the total number of properties in the Company’s portfolio to 30 and marks the Company’s sixth investment in San Francisco, California.
Pebblebrook Hotel Trust is a publicly traded real estate investment trust organized to opportunistically acquire and invest primarily in upper upscale, full-service hotels located in urban markets in major gateway cities. The Company owns 30 hotels, including 24 wholly owned hotels with a total of 5,707 guest rooms and a 49% joint venture interest in six hotels with a total of 1,775 guest rooms. The Company owns, or has an ownership interest in, hotels located in ten states and the District of Columbia, including: Los Angeles, California (Hollywood, Santa Monica, West Hollywood and Westwood); San Diego, California; San Francisco, California; Miami, Florida; Buckhead, Georgia; Bethesda, Maryland; Boston, Massachusetts; Minneapolis, Minnesota; New York, New York; Portland, Oregon; Philadelphia, Pennsylvania; Columbia River Gorge, Washington; Seattle, Washington; and Washington, DC.
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These historical hotel operating results include information for all of the hotels the Company owned as of May 22,2014. 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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