LOS ANGELES-As GlobeSt.com reported last week, on behalf of an ownership group led by SBE Entertainment Group and Nimes Capital, Jones Lang LaSalle's Hotels & Hospitality Group has secured $125 million of refinancing proceeds for the SLS Hotel at Beverly Hills. GlobeSt.com chatted with JLL executives regarding the L.A. hospitality market and emerging trends within that market sector.
JLL's managing director John Strauss tells GlobeSt.com that the emergence of Downtown L.A. as a vibrant, true city-center hotel market is driven by the growing critical mass of L.A. Live venues and the number of hotel rooms allowing group convention demand into L.A. He adds that he expects to see “continued worldwide prominence of the hotel market on the Westside of Los Angeles in the famous and bustling communities of Beverly Hills, Santa Monica, West Hollywood and Westwood.” He also anticipates “emergence and connectivity of Hollywood as a central and highly popular leisure destination in L.A., due to its proximity to the city's most vibrant clubs, concert venues and movie studios and location along the popular Red-Line subway, which connects Universal City with Downtown L.A.”
Strauss adds that generally, given the gateway status of Los Angeles as a world-renowned city, any hotel that comes to market is subject to a high degree of investor enthusiasm. “Those hotels that are fee simple and unencumbered by management on the Westside of Los Angeles, given the high barriers to entry, are attracting the most eager interest.”
Lauro Ferroni, VP, research for JLL, tells GlobeSt.com that the Los Angeles hotel market is performing strongly and posted double-digit revenue-per-available-room growth in 2011 and 2012, growth rates exceeding the overall average US growth during the same time. “In 2013 through February, the market has seen a further out-sized lift of nearly 9% RevPAR, driven largely by gains in average daily rate. The fact that recent RevPAR growth has been powered by rate gains is enabling hotel owners to flow more profit to the bottom line. Thus far in February, Los Angeles has outperformed San Diego and San Francisco in terms of year-over-year growth.”
Ferroni adds that REITs are targeting branded, high-quality assets with in-place cash flow—like the SLS Hotel Beverly Hills—whereas private-equity buyers are often seeking value-add investment opportunities where they can drive returns by improving operations. “The Los Angeles market also attracts significant interest from Asian-based investors. These buyers predominantly pursue assets unencumbered by brand and/or independent hotels.”
In the construction arena, Ferroni says that as improving fundaments fuel continued demand growth, Los Angeles lodging supply is expected to grow conservatively in the next four years, achieving a projected compound annual growth rate of 0.8% through 2014, which is below the long-term average for the city and for the country. Aside from Downtown, additional submarkets continuing to garner high investor interest include Beverly Hills, Santa Monica and West Hollywood.
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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.
