By Jon Peterson
Bethesda, Md.- based LaSalle Hotel Properties has purchased the 681-room Westin Market Street hotel in San Francisco at a 5 percent cap rate, according to sources familiar with the transaction. This return is based on the property’s existing net operating income.[contextly_sidebar id=”Zxv0DV9pkUiU17Mrp8JmnH1qnnp6ucEq”]The buyer of the property did not respond to several phone calls seeking comment for this story, however LaSalle did reveal in a prepared statement that it had paid $350 million to purchase the property.
This transaction is another example of how popular the San Francisco hotel market is. “I would suspect that San Francisco is the number two hotel market from an investment standpoint, right behind New York City. There are many investors looking for properties in San Francisco,” says Tom Callahan, a senior managing director in the San Francisco office of PKF Consulting USA, a CBRE company.
The San Francisco hotel market has just completed a very strong year from a RevPAR and occupancy basis. “The RevPAR grew somewhere in the range of 12 percent to 14 percent in 2014. We are expecting that the RevPAR growth for this year will be around 9 to 10 percent. Most of the hotels in the marketplace have occupancy in the mid 80 percent range, which is a very strong figure,” said Callahan.
There are a couple of reasons for this. “The biggest cause of this is that there continues to be no new supply added to the marketplace. Another factor is that the area in general has a very strong economic base,” said Callahan.
The Westin Market Street property is located at 50 Third Street. LaSalle has decided to rename the property Park Central San Francisco. The hotel, which was built in 1984, had undergone $14 million worth of renovations over the past six years.
LaSalle Hotel Properties is a major owner of hotel properties across the country. The publicly traded REIT owns 45 hotels totaling 11,300 guest rooms, before the acquisition of the Westin property. San Francisco remains one of its targeted markets. The buyer now owns 7 properties in the market.