SAN FRANCISCO-After failing to win permission to convert part of the property into residences, Maritz, Wolff & Co. and Saudi billionaire Prince Alwaleed bin Talal have agreed to sell the Fairmont San Francisco hotel to Woodridge Capital Partners LLC, a Los Angeles-based real estate developer and investor. Woodridge will work with L.A.-based Oaktree Capital Management LP on the purchase, which will total approximately $200 million.
As part of a Maritz Wolff plan to reduce its portfolio, the 591-room luxury hotel, located in Nob Hill, was put up for sale in June. Oaktree and Woodridge had purchased the Fairmont Orchid luxury hotel in Hawaii in November 2011. Maritz Wolff, which had owned a portion of the hotel since 1998, was unable to get city permission to convert a section of the Fairmont San Francisco into a residential tower.
GlobeSt.com was unable to reach Maritz Wolff or Woodridge before deadline for comment on the transaction or the state of San Francisco hotel transactions, and Oaktree had no comment.
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As GlobeSt.com recently reported, San Francisco is considered among the highest-performing hospitality markets in the US, with a market occupancy in excess of 80%, according to Mesa West Capital, which last month originated the refinancing of a $130-million first mortgage loan for Hyatt Regency San Francisco between affiliates Dune Real Estate Partners LP and DiNapoli Capital Partners, LLC. The Hyatt Regency is a financial-district hotel in a market with no new supply, a strong office market, and robust convention and leisure demand, Mesa added.
Industry sources say REITs are holding back on investing in hotels in major markets including San Francisco after a year of strong interest in this sector, due to a rocky economy and shaky stock market. Still, hotel fundamentals remain strong, with room revenues increasing during the past year.
“The frenzy started with Pebblebrook Hotel Trust buying the Sir Francis Drake hotel for $90 million in May 2010, and then the excitement started dying off late last year,” Jaime Law, assistant VP at HVS Consulting & Valuation’s San Francisco office, tells GlobeSt.com. Law adds that the Fairmont is well positioned for partial conversion to residential use due to its prestigious Nob Hill location, which offers a good mix of residences as well as hotel rooms. “If it were to be converted into condos, it would be a good change, except there are issues behind converting hotels into extended-use type of properties.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
