SoCal Hotels Are Hot, Hot, Hot
The hotel room mini-bar may become an endangered species, but who cares? We need big bottles to celebrate the return of hotel development. Experts at Bisnow's SoCal Hospitality Summit say we'll see sticks coming out of the ground this year and into 2015.
Nearly 200 attended our recent event at the Montage Beverly Hills.
CBRE SVP Rod Apodaca and colleague Bob Kaplan are working extensively on hotel development deals in downtown LA, Anaheim, and San Diego. The Metropolis site—a full city block with potential for several hotels, one block from Staples Center—is under contract to a Chinese company, and 11 hotels with over 2,600 rooms are planned around Disneyland.
According to VP Dara Friedman, Morgan Stanley Real Estate sources hotel deals by looking for situations that have been lingering to get a competitive advantage. The company primarily invests opportunistic/value add-plus money, targeting assets that are coming out of a broken marketing process or off-market deals. (Isn't that also how Professor X formed the X-Men?)
To Platinum Equity principal Mark Wiesenthal, it feels like the late '80, when everyone was waiting for an uneconomic Japanese buyer. Now the big buzz, if you have a hotel on the market, is the uneconomic Chinese buyer who's trying to get a job for his daughter in the US.
The Chartres Lodging Group prez Maki Bara says that in the last cycle, the company worked on cosmetic renovations. Now it's gotten into deals that involve infrastructure work or adaptive reuse—one step below development. Chartres just bought an office building in Waikiki that it will convert to a hotel, half of which will be suites. (We hope they preserve its history and leave a stapler on your pillow.)
Our moderator, Pircher, Nichols & Meeks partner Michael Scheinberg, notes a couple years ago that the stats in the hotel sector looked ugly. Hospitality transactions dropped from $50B in 2007/'08 to $3B in 2008/'09. Things are definitely stronger now.
Maki, shown here with fellow panelists in our "theater in the round" discussion, calls hotels an "ego play" in which a hardware mogul could aspire to become a hotel owner. Mark says Florida is the one place he's not looking for deals—Platinum owns four hotels there. According to Rod, prices have been pushed so much that the majority of calls today are to find dirt.
Before the program, we snapped Harley Ellis Devereaux's Roy Reel with Sonnenblick Development chairman Bob Sonnenblick. Find out about Bob's latest projects and those of others in coverage of our second panel next week.