Pebblebrook Hotel Trust (PEB) has acquired the Prescott Hotel in San Francisco, CA, for $49 million. The move comes as this hotel real estate investment trust (REIT) gears up to strengthen its presence in the San Francisco market and leverage on the growing fundamentals.
It also represents the company’s 6th investment in San Francisco and leads its total properties’ tally to 30. Kimpton Hotels & Restaurants will carry on managing this property.
As a matter of fact, San Francisco serves as a West Coast hub for not only tourism but also for technology, biomedical, life sciences, banking and financial services. In fact, this market has managed to rank among the top tourist destinations in the world.
Furthermore, the location of the property in the core of Union Square submarket makes this a lucrative buy for Pebblebrook. This market boasts of a well-diversified mix of leisure, corporate, group and convention demand and has aced historically all other San Francisco submarkets.
The Prescott Hotel that comprises 2 buildings – 545 Post Street and 555 Post Street – contains 160-rooms in total. In the 545 Post Street building, the company would own a fee simple interest consisting of 96 guest rooms while in 555 Post Street, it would own a leasehold interest consisting of 64 guest rooms. Notably, in the latter building, the company’s leasehold interest would expire in 2089. The company intends to renovate and reposition this hotel by the next two years.
This hotel enjoyed occupancy of 88% in 2013 and generated room revenue per available room (RevPAR) of $181. Pebblebrook further expects this property to reap EBITDA of $3.2 – $3.8 million and net operating income after capital reserves of $2.7 – $3.3 million during the next 12 months. However, the company expects incurring around $0.3 million of costs for this buyout as well as $1.4 million of expenses related to the defeasance of a present loan.
Pebblebrook currently has a Zacks Rank #2 (Buy). Investors interested in the REIT industry may also consider stocks like RLJ Lodging Trust (RLJ), Chatham Lodging Trust (CLDT) and Chesapeake Lodging Trust (CHSP). While RLJ Lodging carries a Zacks Rank #1 (Strong Buy), Chatham and Chesapeake have the same rank as Pebblebrook.
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