February 16, 2011 · 0 Comments
BETHESDA, Md.–(Hospitality Business News)–Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today announced that it has acquired the Argonaut Hotel for $84.0 million. The 252-room, upper-upscale, full-service, boutique-style hotel is located in San Francisco, California, in the heart of Fisherman’s Wharf. The property will continue to be managed by Kimpton Hotels & Restaurants (“Kimpton”). The transaction includes the assumption of a $42.0 million secured loan, with the balance of the purchase price funded by the Company with available cash.
“We are pleased to acquire such a distinctive hotel in one of the most dynamic areas of San Francisco,” said Jon Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “The hotel is situated in an excellent location in Fisherman’s Wharf and is in close proximity to the area’s major attractions. The hotel is a spectacular historic landmark that is surrounded by a wealth of entertainment and leisure activities. Moreover, the Argonaut is the market leader in the internationally known Fisherman’s Wharf market. The strong leisure and group demand in this market, combined with extremely high barriers to entry, makes the Argonaut a very compelling addition to our growing portfolio.”
The Argonaut Hotel is located in the popular Fisherman’s Wharf area of San Francisco, California, within the San Francisco Maritime National Historical Park and just blocks from numerous fine dining, entertainment and shopping establishments. Fisherman’s Wharf is an historic part of San Francisco that has long been known for its vibrant, marine-oriented atmosphere and is home to the Aquarium by the Bay, Anchorage Square, Ghirardelli Square and PIER 39, a 110-shop, two-story, festival marketplace. The area is also the main departure point for Alcatraz Island, a prime tourist attraction. San Francisco has consistently been featured as a top tourist destination in North America for both domestic and international travelers and boasts an exceptional array of natural attractions. In addition to the abundant and diverse collection of leisure activities, the city’s location on the west coast makes it a natural gateway to travelers from Asia.
The hotel was originally constructed in 1907 as the Haslett Warehouse, before its conversion to a hotel in 2003. The Argonaut Hotel is a boutique-style property located directly across from San Francisco Bay with stunning views of Alcatraz Island, the Golden Gate Bridge and the Transamerica Pyramid. The property consists of 252 well-appointed guestrooms, with decor that celebrates the nautical history of the city’s waterfront. The property highlights the historic features of the property, including exposed red brick walls, high ceilings and original redwood columns and beams. The hotel features over 8,000 square feet of meeting space, including the 4,200 square-foot Golden Gate Ballroom and the 1,800 square-foot Maritime Room. The property also features the Blue Mermaid Chowder House, a 170-seat, three-meal-a-day restaurant that serves fresh seafood fare and is locally known for its excellent chowder. Additionally, the hotel is home to the San Francisco Maritime National Historical Park Visitors Center, along with several retail outlets including Starbucks, Ben & Jerry’s Homemade Ice Cream, Blazing Saddles Bike Rentals and Tours, and the Winery Collective Tasting Room.
In 2010, the Argonaut Hotel operated at 87% occupancy, with an average daily rate of $185. During the next 12 months, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of approximately $5.1 to $5.6 million and net operating income after capital reserves of approximately $4.2 to $4.7 million.
The Company will own a leasehold interest in the property through a long-term ground lease with the Department of the Interior National Park Service by way of the United States of America. There are currently 49 years remaining on the long-term ground lease, which expires in 2059. The $42.0 million secured loan that is being assumed in connection with the acquisition is a non-recourse, interest-only loan, subject to a fixed annual interest rate of 5.67%. The loan matures in March 2012.
The hotel will continue to be managed by Kimpton, which has managed the property since 2003. In addition to the Argonaut Hotel, Kimpton also manages Pebblebrook’s 416-room Sir Francis Drake in downtown San Francisco, California, 183-room Monaco Washington DC in downtown Washington, DC and 140-room The Grand Hotel Minneapolis in downtown Minneapolis, Minnesota.
“We are excited to expand our very successful relationship with Kimpton Hotels & Restaurants,” continued Mr. Bortz. “They are extremely experienced with the San Francisco market and we believe they will continue to drive market-leading performance at the Argonaut Hotel.”
The Company expects to incur approximately $1.4 million of costs related to the acquisition of this hotel that will be expensed as incurred.
The Argonaut Hotel marks the ninth acquisition for the Company since completing its initial public offering in December 2009.