Pebblebrook Buys Embassy Suites in Downtown San Diego for $112M
- Jan 31, 2013
Pebblebrook Hotel Trust, of Bethesda, Md., has purchased the Embassy Suites San Diego Bay – Downtown for $112.5 million, Pebblebrook announced Wednesday. The 337-suite, upper upscale, full-service hotel will be managed by HEI Hotels and Resorts, of Norwalk, Conn.
As part of the acquisition, Pebblebrook is assuming a $66.8 million secured, non-recourse loan subject to a fixed interest rate of 6.275% and maturing in June 2016. The balance of the price is being funded by the purchaser with available cash.
Built in 1988, the hotel was fully renovated in 2006 and then completed a $3.5 million guest suites renovation in May 2012. It features a 12-story atrium; approximately 5,000 square feet of meeting space, including a 2,000-square-foot ballroom; a heated indoor pool and whirlpool; a restaurant; and 3,400 square feet of leased ground-floor retail space.
The hotel is at Harbor Drive and Pacific Highway, four blocks from the San Diego Convention Center and similarly close to Pebblebrook’s other property in downtown San Diego, the Westin Gaslamp Quarter. In 2012, the Embassy Suites averaged 83 percent occupancy, with an average daily rate of $198 and RevPAR of $165. EBITDA in 2012 was $8.8 million and NOI after capital reserves was $7.8 million.
The downtown San Diego hotel market is a “very healthy” one, Jeff Lugosi, senior vice president at the Los Angeles office of PKF Consulting USA, told Commercial Property Executive. The average room rate rose 4.6 percent in 2012 over the previous year, to $176, and the average occupancy rate increased 1.8 percent, to about 81 percent. As a result of those factors, he added, RevPAR climbed about 6.5 percent.
“San Diego benefits from a very strong convention calendar,” said Lugosi, and it’s also a strong leisure destination. In addition, significant occupancy is driven by corporate and government-related travel (with all of the U.S. Navy facilities in metro San Diego), he said, and the combination of the three helps to balance weekday and weekend visits, keeping occupancy up.
With this acquisition, Pebblebrook’s portfolio now totals 26 hotels (owned wholly or through joint ventures) in 10 states and the District of Columbia, totaling 6,685 guest rooms and representing $2.1 billion of invested capital. The REIT focuses on opportunistically acquisitions and investments in upper upscale, full-service hotels in major gateway cities.