Thayer Lodging Group, Annapolis, Maryland, on Monday announced it acquired the 336-room Ritz-Carlton, San Francisco, from Host Hotels and Resorts. Host said the sale price was approximately US$161 million.
Thayer said it plans to invest up to US$17 million in the hotel, the first investment of Thayer Fund VI, which is targeted as a US$300 million fund.
Lee Pillsbury, co-chairman and CEO of Thayer Lodging Group, told HOTELS that the Thayer Fund VI is also close to finalizing a deal for a major resort and that it continues to like great locations in major markets with barriers to entry. “We are seeing a good number of opportunities, especially larger deals as there is less competition for expensive assets,” he said. “We expect to do more large transactions.”
Thayer noted in its release about the Ritz-Carlton acquisition that since it acquired the JW Marriott in San Francisco in 2011, the property’s net operating income has tripled, and the hotel has risen to the top of its competitive set in the San Francisco market. It is hoping for similar results with this latest acquisition.
Pillsbury said that Thayer plans to redo the guestrooms and overall wants to “reposition the hotel to appeal to Gen Y customers without losing the core of what it means to be a Ritz-Carlton.”
While the San Francisco market has heated up from a hotel transaction perspective, Pillsbury added that Thayer remains a great believer in the upside of the market. “There is growth in residential and office real estate driven by social media companies moving their headquarters downtown to where people want to live,” he said. “While San Francisco is a hot hotel market, it is a hotter office and residential market, and we see no hotel supply increases coming. The market should only get better.”
Host Hotels & Resorts Executive Vice President and CFO Gregory Larson said, “We are excited to announce this sale at an attractive price. As we have done in the past, we will, from time to time, make opportunistic sales of what we consider to be core assets in target markets for the right price. This brings our total dispositions since the beginning of last year to over US$600 million.”
The US$479,000/key sale price is a new record this cycle for the greater San Francisco market (the high water mark was the Mandarin Oriental trade for $399,000/key in August 2011), according the R.W. Baird Equity Research. This sale could bode well for Starwood Hotels & Resorts, which reportedly is looking to sell the 260-room St. Regis in San Francisco for US$140 million, or nearly US$540,000/key.