West Hollywood Hotel Trades Hands
Introduction to the Trade
LaSalle Partners’ first ever hotel bet was the Montrose.
In late November, Pebblebrook Hotel Trust, which acquired LaSalle Hotel Properties for billions of dollars after battling Blackstone, announced it dumped the 133-key, West Hollywood hotel, with a “trailing 12-month financial performance.”
The roughly $44 million trade of the boutique hotel at 900 Hammond Street, near Sunset Boulevard, amounts to about $333,000 a room.
That is nowhere near a record trade, but a sale is a sale in an area such as Los Angeles where hoteliers are defaulting on debt and facing forced sales — and the real estate investment trust’s latest strategy is selling hotels and repurchasing shares at discount.
“L.A. is a difficult market to sell in today due to unfriendly government policies and the lagging impact from the fires, strikes, ICE, National Guard,” Jon Bortz, Pebblebrook chairman and chief executive, said. Measure ULA, or the so-called “mansion tax,” doesn’t help either, but West Hollywood commercial deals are exempt. Another issue, the perception that homelessness is rampant, contributes to declining tourism, and therefore revenues.
“We were very happy to find an interested buyer. We were not specifically marketing the hotel. The buyer approached us,” Bortz said in an email.
The company did not disclose the buyer, but a person familiar said it is a high-net-worth individual who has roots in Los Angeles, believes in its future and loves buying all kinds of real estate at discounts. There are at least a couple people who fit that description.
Separately, the publicly traded company said it has another other hotel under contract at a sales price of $72 million, but was vague on details.
All Kinds of Pain
There’s Los Angeles hotel pain, and then there’s Los Angeles office pain.
Carlton Plaza, a 155,000-square-foot, brick and black glass office building located in the Valley’s Woodland Hills neighborhood, is on the auction block. The auction was scheduled for Nov. 24 but was postponed to Dec. 22. It was the special servicer that requested a postponement, according to Prestige Default Services.
Carlton Plaza owner Peregrine Realty Partners owes lenders about $24 million, records reveal.
The debt was originated by JP Morgan, packaged with other commercial property debts and sold off to investors.
The property, at 20750 Ventura Boulevard, is only worth $12 million, according to Morningstar Credit, but in pre-pandemic 2018, it was valued at $35 million. The property is 71 percent occupied, the most recent available data shows. (Offices in Woodland Hills have a 22 percent vacancy rate, versus 20 percent in the Valley.).
Peregrine Realty Partners’ principals did not respond to a request for comment.
More on Rexford
Last column, the industrial real estate investment trust announced a chief executive shakeup and teased an announcement of an independent board member (all post-Elliott Investment Management stake). That happened sooner than anticipated. Rexford appointed David Stockert to the company’s board of directors, effective Jan. 1. He’ll serve on the board’s audit committee.
Stockert is a general partner of Sweetwater Opportunity Funds, a series of private real estate investment funds. He has held executive and senior roles at other REITs such as Post Properties, Weeks Corporation and Duke Realty, which was acquired by Prologis.
Rexford’s latest proxy reveals the non-employee director compensation program includes a $100,000 annual cash retainer and $150,000 annual restricted stock award — and because he’ll be an audit committee member he’ll get another $20,000 in cash.
Busy, Busy Beverly Hills
A lease, a buy and development happened in the ritzy enclave of Beverly Hills.
United Talent Agency renewed its 192,000-square-foot headquarters lease at the plaza that shares its name at 9336 to 9346 Civic Center Drive; Alo Yoga dropped $90 million for headquarters at 8942 Wilshire Boulevard, which came out to more than $1,000 a square foot; and Cain’s $10 billion One Beverly Hills went vertical.
Read More
Malibu exception: Boutique hotel deal among priciest in California history
Key data point in L.A. hotel sector: pain
Hollywood talent rep renews Beverly Hills HQ despite film slump
Conclusion
The West Hollywood hotel trade is a significant event in the Los Angeles real estate market, with the 133-key Montrose hotel being sold for $44 million. The trade is a result of Pebblebrook Hotel Trust’s strategy to sell hotels and repurchase shares at a discount. The company has also announced another hotel under contract for $72 million. The Los Angeles hotel market is facing challenges due to unfriendly government policies, fires, strikes, and the perception of rampant homelessness, which contributes to declining tourism and revenues.
FAQs
Q: Who bought the Montrose hotel in West Hollywood?
A: The buyer is a high-net-worth individual with roots in Los Angeles who believes in the city’s future and loves buying real estate at discounts.
Q: How much was the Montrose hotel sold for?
A: The hotel was sold for $44 million, which amounts to about $333,000 per room.
Q: What is the current state of the Los Angeles hotel market?
A: The market is facing challenges due to unfriendly government policies, fires, strikes, and the perception of rampant homelessness, which contributes to declining tourism and revenues.
Q: What is Pebblebrook Hotel Trust’s strategy?
A: The company’s strategy is to sell hotels and repurchase shares at a discount.
Q: What other notable real estate events occurred in Beverly Hills?
A: United Talent Agency renewed its headquarters lease, Alo Yoga bought a new headquarters, and Cain’s $10 billion One Beverly Hills development went vertical.
