BETHESDA, Md.–Pebblebrook Hotel Trust (NYSE:PEB) (the “Company”) today announced that it has acquired the Radisson Hotel Fisherman’s Wharf and Retail for $132.0 million. The 355-room hotel, which includes approximately 44,000 square feet of street retail space, is located in the heart of Fisherman’s Wharf in San Francisco, CA. The property will be managed by Davidson Hotels & Resorts (“Davidson”).
“We’re very pleased with our acquisition of the Radisson Hotel Fisherman’s Wharf and Retail, located in one of San Francisco’s strongest submarkets,” said Jon Bortz, Chairman and Chief Executive Officer of Pebblebrook Hotel Trust. “This hotel benefits from an excellent location in the heart of Fisherman’s Wharf, which is reflected in the hotel’s consistently high occupancy levels and strong cash flows. The property’s diversity of income streams, including the revenue from 44,000 square feet of premier ground level retail space, coupled with a significant repositioning opportunity, makes the Radisson Hotel Fisherman’s Wharf and Retail another terrific addition to our expanding portfolio.”
The Radisson Hotel Fisherman’s Wharf and Retail occupies an entire block of San Francisco’s Fisherman’s Wharf, bordered by Jefferson, Mason, Beach and Powell Streets, across the street from Pier 39. Situated on the San Francisco Bay, the hotel offers outstanding views of the Golden Gate Bridge and Alcatraz and is immediately adjacent to the Ferry terminals serving popular tourist destinations around the Bay. Just blocks from famous landmarks, including San Francisco’s Aquarium of the Bay, Ghirardelli Square and the Powell Street cable car turnaround, the hotel is also a short distance from North Beach, the Financial District and Moscone Center, California’s largest convention center and exhibit hall. San Francisco consistently ranks among the top tourist destinations in the world and serves as a West Coast hub for tourism, technology, banking and financial services. The hotel’s immediate area along Jefferson Street is currently undergoing a $4.0 million beautification project, creating a pedestrian-friendly, outdoor plaza experience directly in front of the property, improving the experience for the over 25,000 people who visit the area each day.
Originally built in 1964 as a 250-room hotel with 14,000 square feet of retail space, the hotel expanded in 1999 with the construction of an additional 105 rooms and 30,000 square feet of retail space. The hotel was updated by a comprehensive $4.5 million renovation in 2012, offering contemporary guest rooms and a refreshed lobby. The hotel also features 1,720 square feet of meeting space and a newly renovated fitness center. The hotel’s guest rooms offer remodeled bathrooms, new Sleep Number beds, 37-inch flat-screen TVs, upgraded lighting and contemporary décor.
The property includes 44,000 square feet of ground level retail space, offering unparalleled visibility and extensive street frontage along Jefferson Street, the primary thoroughfare of Fisherman’s Wharf, as well as 235 parking spaces, benefitting from a high-demand location driven by the property’s proximity to numerous tourist attractions. The retail space consists of twenty units, including food, convenience and tourist-focused retail and service providers.
In 2013, the Radisson Hotel Fisherman’s Wharf is forecasted to operate at 89 percent occupancy, with an average daily rate (“ADR”) of $184, room revenue per available room (“RevPAR”) of $165, earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $11.9 million and net operating income after capital reserves (“NOI”) of $11.0 million. The property’s retail space is currently 95 percent leased with an average rent per square foot over $100. In 2014, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $10.2 to $10.7 million and net operating income after capital reserves (“NOI”) of $9.3 to $9.8 million. The Company’s 2014 forecasted financial performance for the property includes the negative impacts of Prop 13 property tax reassessment increases, insurance increases and a negative impact in the fourth quarter from a planned renovation of the hotel.
The company will own a leasehold interest in the property through a ground lease, which currently has 48 years remaining and expires in 2062.
The Company plans to invest $18.0 to $20.0 million between 2014 and 2015 in a complete renovation and repositioning of the hotel, including all guest rooms and public areas, both interior and exterior. The property’s design will be overseen by Dawson Design Associates, the same design team that repositioned the Company’s Hotel Zetta, also in San Francisco, CA. The hotel’s comprehensive guest room and public area improvements are expected to commence in the fourth quarter of 2014 and the Company plans to rename the property upon completion of the renovation.
“We are very excited about the opportunity to reposition the Radisson Hotel Fisherman’s Wharf to an upper upscale boutique hotel,” noted Mr. Bortz. “We believe this type of product will be positively received in the vibrant Fisherman’s Wharf market and the comprehensive renovation and repositioning plan that will touch all aspects of the hotel will provide a new and unique guest experience.”
In conjunction with the Company’s acquisition of the Radisson Hotel Fisherman’s Wharf and Retail, the Company has selected Davidson as manager for the hotel. Davidson also manages the Company’s DoubleTree by Hilton Bethesda – Washington, DC.
“We are eager to expand our successful relationship with Davidson Hotels & Resorts,” continued Mr. Bortz. “The acquisition of the Radisson Hotel Fisherman’s Wharf and the selection of Davidson as manager of the hotel mark our second Davidson-managed hotel, and we look forward to incorporating their operational expertise at the Radisson Hotel Fisherman’s Wharf.”
“We are thrilled to further our relationship with Pebblebrook Hotel Trust and to bring our extensive experience to the Radisson Hotel Fisherman’s Wharf,” said Davidson’s President and Chief Executive Officer John Belden. “We look forward to expanding our portfolio further into the San Francisco market, as we envision abundant opportunities to be unlocked at this hotel.”
The Company expects to incur approximately $2.1 million of costs related to the acquisition of the hotel and $1.0 million of costs related to the transition of a new management team that will be expensed as incurred.
The acquisition of the Radisson Hotel Fisherman’s Wharf and Retail brings the total number of properties in the Company’s portfolio to 29, marks the Company’s fifth investment in San Francisco, California and represents the Company’s second investment in Fisherman’s Wharf.
About Pebblebrook Hotel Trust
Pebblebrook Hotel Trust is a publicly traded real estate investment trust (“REIT”) organized to opportunistically acquire and invest primarily in upper upscale, full-service hotels located in urban markets in major gateway cities. The Company owns 29 hotels, including 23 wholly owned hotels with a total of 5,546 guest rooms and a 49% joint venture interest in six hotels with a total of 1,775 guest rooms. The Company owns, or has an ownership interest in, hotels located in ten states and the District of Columbia, including: Los Angeles, California (Hollywood, Santa Monica, West Hollywood and Westwood); San Diego, California; San Francisco, California; Miami, Florida; Buckhead, Georgia; Bethesda, Maryland; Boston, Massachusetts; Minneapolis, Minnesota; New York, New York; Portland, Oregon; Philadelphia, Pennsylvania; Columbia River Gorge, Washington; Seattle, Washington; and Washington, DC. For more information, please visit us at www.pebblebrookhotels.com and follow us on Twitter at @PebblebrookPEB.
About Davidson Hotels & Resorts
Davidson Hotel & Resorts is an award-winning, full-service hotel management company that provides management, development/renovation, acquisition, consulting and accounting expertise for the hospitality industry. The company has amassed one of the purest full-service hotel portfolios in the industry, ranging from the upper-upscale to near-luxury segments; encompassing 46 upscale, full-service independent and branded hotels with more than 13,600 rooms across the United States, including such affiliations as Hyatt, Hilton, DoubleTree by Hilton, Embassy Suites, Hilton Garden Inn, Marriott, Renaissance, Courtyard by Marriott, Westin, Sheraton and Radisson. Additional information on Davidson may be found at the company’s website www.davidsonhotels.com.