SAN FRANCISCO-Pebblebrook Hotel Trust has acquired the Argonaut Hotel for $84 million. The 252-room, upper-upscale, full-service, boutique-style hotel is located in San Francisco and will continue to be managed by Kimpton Hotels & Restaurants, which has managed the property since 2003.
“We are pleased to acquire such a distinctive hotel in one of the most dynamic areas of San Francisco,” explains Jon Bortz, chairman, president and CEO of Pebblebrook Hotel Trust. “The hotel is situated in an excellent location in Fisherman’s Wharf and is in close proximity to the area’s major attractions.”
Bortz adds that “the hotel is a spectacular historic landmark that is surrounded by a wealth of entertainment and leisure activities. Moreover, the Argonaut is the market leader in the internationally known Fisherman’s Wharf market. The strong leisure and group demand in this market, combined with extremely high barriers to entry, makes the Argonaut a very compelling addition to our growing portfolio.”
The transaction includes the assumption of a $42-million secured loan, with the balance of the purchase price funded by Pebblebrook with available cash. Jones Lang LaSalle brokered the sale.
In 2010, the Argonaut Hotel operated at 87% occupancy, with an average daily rate of $185. During the next 12 months, Pebblebrook currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization of approximately $5.1 to $5.6 million and net operating income after capital reserves of approximately $4.2 to $4.7 million.
Pebblebrook will own a leasehold interest in the property through a long-term ground lease with the Department of the Interior National Park Service by way of the US. There are currently 49 years remaining on the long-term ground lease, which expires in 2059. The $42-million secured loan that is being assumed in connection with the acquisition is a non-recourse, interest-only loan, subject to a fixed annual interest rate of 5.67%. The loan matures in March 2012.
The Argonaut Hotel is located within the San Francisco Maritime National Historical Park and just blocks from numerous fine dining, entertainment and shopping establishments. The area is also the main departure point for Alcatraz Island, a prime tourist attraction.
The hotel was originally constructed in 1907 as the Haslett Warehouse, before its conversion to a hotel in 2003. The Argonaut Hotel is a boutique-style property located directly across from San Francisco Bay with stunning views of Alcatraz Island, the Golden Gate Bridge and the Transamerica Pyramid.
In addition to the Argonaut Hotel, Kimpton also manages Pebblebrook’s 416-room Sir Francis Drake in downtown San Francisco, California, 183-room Monaco Washington DC in downtown Washington, DC and 140-room The Grand Hotel Minneapolis in downtown Minneapolis, Minnesota. “We are excited to expand our very successful relationship with Kimpton Hotels & Restaurants,” says Bortz. “They are extremely experienced with the San Francisco market and we believe they will continue to drive market-leading performance at the Argonaut Hotel.”
Pebblebrook expects to incur approximately $1.4 million of costs related to the acquisition of this hotel that will be expensed as incurred. The Argonaut Hotel marks the ninth acquisition for the company since completing its initial public offering in December 2009.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
