By Jon Peterson
Bethesda, Md.-based Pebblebrook Hotel Trust has acquired a leasehold interest in the 355-room Radisson Hotel Fisherman’s Wharf and Retail for $132 million or $372,000 per room.[contextly_sidebar id=”6499f2fec704c24be7db45c473357a28″]“We normally don’t reveal what our return expectations are on our investments. I will say that as a guideline for our purchases, we look for unlevered net IRRs in the range of 9 percent to 12 percent,” says Matt Partridge, director of finance and investor relations for Pebblebrook.
The cap rate on this deal is 8.3 percent, according to sources familiar with the transaction. This return is based on current net operating income. The higher cap rate on this deal reflects the fact that the hotel is encumbered by a ground lease.
San Francisco continues to be a very strong market in the eyes of Pebblebrook. “The San Francisco hotel market is one of the strongest if not the strongest hotel market in the country. We have every reason to believe this will continue to be the case in the future. This market is home to many institutional technology companies. They create jobs for these companies and other residual jobs as well,” said Partridge.
The leasehold interest purchased in the property through a ground lease has another 48 years left to run and will expire in 2062. The hotel property is forecasted to operate at 89 percent occupancy for 2013. It will have an ADR of $184 and a RevPAR of $165. The property was built in 1964 and then expanded to its current size in 1999.
The hotel and retail asset covers an entire city block of San Francisco’s Fisherman Wharf. This site is bordered by Jefferson, Mason, Beach and Powell Streets. It sits across the Street from Pier 39.
Pebblebrook is no stranger to the San Francisco hotel market. According to the company’s Web site, it now owns fee simple or ground leases in five other hotels in San Francisco. These are the Argonaut Hotel, Hotel Palomar San Francisco, Hotel Zetta and Sir Francis Drake.
Pebblebrook is a publicly traded real estate investment trust. It owns or has joint venture interests in 29 hotels on a nationwide basis totaling 7,321 rooms. The company’s investment strategy focuses on upper upscale, full-service hotels in urban markets in gateway cities.
Photo courtesy of destination360.com