Beverly Hills' Mr. C Hotel Trades Hands for $65M

Braemar Hotels & Resorts has entered into an agreement to acquire Mr. C Hotel, a 138-room luxury hotels in Beverly Hills. In addition to the hotel, the transaction also includes five condo residences adjacent to the property. The sale transaction is expected to close in July for $77.8 million. The hotel price tag was $65.4 million, while the condo properties cost $12.5 million.

This is Braemar Hotels & Resorts’ first acquisition during the recovery cycle, and it is a complex one, involving OP units, warrants, and mortgage debt. The investor plans to execute a value-add strategy by maximizing operating performance of the hotel.

Braemar acquired the property with $30 million in cash, 2.5 million OP units, 500,000 warrants at a strike price of $6.00, and a $30 million mortgage loan. Ultimately, the property aligns the company’s with strategy to acquire high RevPAR luxury hotels. The sale represents a 5% cap rate based on operating income from December 2019 of $3.9 million and a trailing 12-month 16.5x hotel EBITDA multiple. As a result, Braemar should realize a return of 8% in the next three-to-five years.

The hotel sector was among the most impacted asset classes during the pandemic, but so far this year, capital has been finding its way to hospitality deals. As one example, in April Machine Investment Group completed the $208 million recapitalization of a new construction hospitality portfolio located in Hollywood, CA.  With the package, sponsor Relevant Group can complete the construction of the two hotels by this summer.

Research from JLL shows that institutional investors are behind the hotel activity. Private equity and institutional investors were responsible for 54% of total hotel transactions last year and  they are likely to remain active in the market this year, driving investment activity.