LaSalle to Buy Hotel Vitale in San Francisco for $130MM

By Jon Peterson

Bethesda, Md.-based LaSalle Hotel Properties is under contract to buy a leasehold interest in the 200-room Hotel Vitale in San Francisco for $130 million or $650,000 per room. The public REIT released this information for its fourth quarter and full year 2013 operating results last week.

“We’re excited about the Hotel Vitale. San Francisco has been one of the strongest U.S. markets and has one of the most favorable supply outlooks for the next several years. Demand growth has been solid and the market results have continued to reflect substantial pricing power,” said Michael Barnello, chief executive officer with LaSalle, during the conference call on the operating results.

He thinks that the property is in a very favorable location. “Hotel Vitale is in one of the best locations in San Francisco, in the South Financial District on the Embarcadero, with breathtaking views overlooking the bay. The hotel is located within a few blocks of various corporate offices, including Google, GAP, PG&E and Salesforce,” said Barnello.

The closing of this transaction is subject to the City of San Francisco, as landlord, approving the assignment of the ground lease. One of the current owners of the ground lease is San Francisco-based The Emerald Fund. Although the firm did not respond to phone calls for this story, it was involved in the original development of the property in 2005. According to the Emerald Fund Web site, the value of the property was $70 million.

The cap rate on this transaction is projected to be in the range of +/-5 percent, according to sources familiar with the transaction.

Hotel Vitale has been performing at a high level than comparable properties in the city. “This property is one of the best performing hotels in San Francisco. This is reflected in its occupancy rate of more than 80 percent and having an ADR of $300. There was a great deal of interest from all kinds of capital sources who were interested in buying this property,” says Tom Callahan, co-president and chief executive officer of PKF Consulting USA. He works in the firm’s regional office in San Francisco.

The San Francisco hotel market has been performing strongly for LaSalle recently. “San Francisco was very strong in the fourth quarter of 2013 with a RevPAR increase of 14.5 percent, comprised of 10.2 percent in ADR improvement and 3.9 percent growth in occupancy,” said Bruce Riggins, chief financial officer for LaSalle, during the conference call.

LaSalle is a national hotel owner. The public REIT owns 45 properties in 10 states totaling 11,400 guest rooms. The company targets upscale, full-service assets.

West Coast Commercial Real Estate News