BETHESDA, Md.—Pebblebrook Hotel Trust has acquired the Prescott Hotel for $49 million. The 160-room hotel is located in the heart of Union Square in San Francisco, Calif. The property will continue to be managed by Kimpton Hotels & Restaurants.
“We’re excited about our acquisition of the Prescott Hotel and our opportunity to further expand our already strong presence in the highly desirable San Francisco market,” said Jon Bortz, chairman and chief executive officer of Pebblebrook Hotel Trust. “Just one block west of Union Square, this hotel, which represents our sixth hotel investment in San Francisco, is attractively located in the city’s world-renowned shopping and entertainment district. The property is central to San Francisco’s primary business demand drivers, including the Financial District, the Moscone Convention Center and the Union Square submarket, which has historically outperformed all other submarkets within San Francisco due to its well-balanced, diversified mix of leisure, corporate, group, and convention demand.”
The upper upscale, full-service Prescott Hotel is comprised of two buildings: 545 Post Street, in which the company will own a fee simple interest consisting of 96 guestrooms (seven stories), and 555 Post Street, an adjacent attached building, in which the company will own a leasehold interest consisting of 64 guestrooms (located on floors three though seven). The company’s leasehold interest in the 555 Post Street building currently has 75 years remaining and expires in 2089.
545 Post Street was originally built in 1913 as the Cecil Hotel and 555 Post Street was originally built in 1922 for the Union League Club. Both buildings were renovated, repositioned, and opened as The Prescott Hotel in 1989. The hotel includes 600 square feet of meeting space, a fitness center, and offers valet parking.
In 2013, the Prescott Hotel operated at 88 percent occupancy, with an average daily rate of $206 and room revenue per available room of $181. During the next 12 months, the company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation, and amortization of $3.2 to $3.8 million and net operating income after capital reserves of $2.7 to $3.3 million.
The company plans to undertake a comprehensive renovation and repositioning of the hotel sometime between 2015 and 2016, including all guestrooms, bathrooms, and public areas. The property’s design will be overseen by Dawson Design Associates, the same design team that helped reposition the company’s Hotel Zetta and that is helping reposition the Company’s Radisson Hotel Fisherman’s Wharf, both of which are also located in San Francisco, Calif. The full scope and timing of the renovation are not yet fully defined, but concept and design work will commence shortly.
“We are thrilled with the opportunity to creatively reposition the Prescott Hotel,” Bortz noted. “We believe a renovated and repositioned product will be positively received in the vibrant Union Square market and the comprehensive nature of the repositioning will bring a new and unique guest experience to San Francisco—stay tuned.”
The Prescott Hotel will continue to be managed by Kimpton, which has managed the Prescott Hotel since 1989. In addition to the Prescott Hotel, Kimpton also manages eight of the company’s other hotels.
“We’re pleased with the opportunity to expand our very successful relationship with Kimpton Hotels & Restaurants,” Bortz continued. “Their strong track record, market knowledge and extensive experience in operating high-quality boutique properties such as the Prescott Hotel gives us immense confidence in the future for this property.”
“We are delighted to be furthering our relationship with Pebblebrook Hotel Trust,” said Kimpton’s CEO and President, Mike Depatie. “Our successful relationship continues to grow, and we look forward to further collaborative successes.”
The company expects to incur approximately $0.3 million of costs related to the acquisition of the hotel and $1.4 million of costs associated with the defeasance of an existing loan.
The acquisition of the Prescott Hotel brings the total number of properties in the company’s portfolio to 30 and marks the company’s sixth investment in San Francisco, Calif.