BETHESDA, Md.–(www.hospitalitybusinessnews.com)–Pebblebrook Hotel Trust today announced that it has acquired the Embassy Suites San Diego Bay – Downtown for $112.5 million. The 337-suite, urban, upper upscale, full service hotel is located in downtown San Diego, California. The property will be managed by HEI Hotels and Resorts . As a part of this transaction, the Company is assuming a $66.8 million secured, non-recourse loan, with the balance of the purchase price being funded by the Company with available cash.
“We’re very excited about the acquisition of the Embassy Suites San Diego Bay – Downtown and the opportunity to further expand our presence in the highly desirable downtown San Diego market,” said Jon Bortz, Chairman and Chief Executive Officer of Pebblebrook Hotel Trust. “The hotel is extremely well located at the corner of Harbor Drive and Pacific Highway, just steps away from Seaport Village and the waterfront. This ideal location is only four blocks from the San Diego Convention Center, and six blocks from Westfield Horton Plaza Shopping Mall, as well as a variety of restaurant and entertainment options in the vibrant Gaslamp Quarter. The strong leisure, group and convention demand for San Diego, particularly in this location along the waterfront, makes the Embassy Suites San Diego Bay – Downtown an excellent investment for our company.”
The 337-suite Embassy Suites San Diego Bay – Downtown benefits from a highly visible and easily accessible location at the intersection of Harbor Drive and Pacific Highway in downtown San Diego, just blocks away from the Company’s recently renovated Westin Gaslamp Quarter. The location is ideal for convention and leisure travelers alike, within walking distance of the city’s leading attractions and demand generators, including the San Diego Convention Center, Seaport Village, San Diego Trolley Station, Horton Plaza Shopping Mall, the U.S.S. Midway Aircraft Carrier Museum, PETCO Park and countless restaurants and entertainment options in the historic Gaslamp Quarter. The hotel is also located minutes from the renowned San Diego Zoo, Sea World, Coronado Island, Balboa Park Museums, Old Town, Qualcomm Stadium, the San Diego Sports Arena, San Diego Naval Pier, San Diego State University, University of California at San Diego and University of San Diego.
Built in 1988, the hotel was fully renovated in 2006 and completed a $3.5 million guest suites renovation in May 2012. The hotel features a 12-story atrium and panoramic views of San Diego Bay and the city. Standard suite amenities include two separate rooms, 37- or 42-inch flat screen high-definition televisions, microwave, mini refrigerator, coffee maker, dining table and chairs, sofa bed and high-speed wireless internet access. The hotel features approximately 5,000 square feet of meeting space, including the 2,032 square foot Monterrey Ballroom, an indoor heated swimming pool and whirlpool and 3,411 square feet of leased retail space located on the ground floor. The hotel also offers PFC Bar & Grill, open daily from 11:00am until midnight, serving fresh seafood and offering a wide selection of spirits, wine and beer, including many of San Diego’s famous locally produced microbrews.
In 2012, the Embassy Suites San Diego Bay – Downtown operated at 83 percent occupancy, with an average daily rate (“ADR”) of $198, room revenue per available room (“RevPAR”) of $165, earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $8.8 million and net operating income after capital reserves (“NOI) of $7.8 million. For all of 2013, the Company currently forecasts that the hotel will generate EBITDA of $8.5 to $9.0 million and NOI of $7.5 to $8.0 million, both of which are before an expected $1.0 million renovation impact.
In connection with the acquisition, the Company is assuming a $66.8 million secured, non-recourse loan, which is subject to a fixed interest rate of 6.275%. The loan matures in June 2016.
In conjunction with the Company’s acquisition of the Embassy Suites San Diego Bay – Downtown, the Company has selected HEI as manager for the hotel.
“HEI has a strong presence in the San Diego market and has a great understanding of, and excellent experience with operating all-suite upper upscale properties,” continued Mr. Bortz. “We’re delighted to be developing a strategic relationship with HEI and look forward to working with them at the Embassy Suites San Diego Bay – Downtown. With the addition of HEI, we now have 10 third party managers operating our hotels throughout our portfolio. This improves our already diverse group of hotel management companies, while also enhancing our opportunities to expand our best practices and asset management initiatives.”
“We are excited to create this new partnership with Pebblebrook Hotel Trust,” said HEI’s Chief Executive Officer, Anthony Rutledge. “The Embassy Suites San Diego Bay – Downtown exhibits strong growth potential and we are eager to bring our proven industry experience to the hotel.”
The Company expects to incur approximately $0.9 million of costs related to the acquisition of the hotel and $0.2 million of costs related to the transition of a new management team that will be expensed as incurred.
The acquisition of the Embassy Suites San Diego Bay – Downtown brings the total number of properties in the Company’s portfolio to 26, comprising $2.1 billion of invested capital.