The owner of L.A. Live, the downtown Los Angeles home of professional basketball and hockey teams, wants to bring an equity partner into its high-profile hotels in a long-term bet that hospitality and tourism will rebound.
Owner Anschutz Entertainment Group said it's working with JLL to find a partner for the interconnected J.W. Marriott and Ritz-Carlton hotels at L.A. Live. The hotels are part of the $2.5 billion, 5.6 million-square-foot L.A. Live, seen as a development catalyst for downtown Los Angeles when construction began 15 years ago. The development houses the Microsoft Theatre and the Crytpo.com Arena, home of the Los Angeles Clippers, Kings, Lakers and Sparks.
In its statement, AEG, founded by billionaire Philip Anschutz, said it would move ahead on previously announced plans to expand the J.W. Marriott with an additional 860 rooms and 150,000 square feet of ballroom and meeting space. It marks a bet that hospitality and tourism will further recover from a loss of demand during the pandemic.
"With demand currently very strong for high-quality hotel investment opportunities in marquee locations, we believe now is the right time to identify a partner to help us complete this project well in advance of upcoming major citywide events such as the 2026 World Cup and the 2028 Olympics,” Ted Fikre, vice chairman and chief legal and development officer of AEG, said in the statement.
The investment comes as real estate investors are feeling more bullish on people returning to in-person events, lodging and restaurants as the pandemic's impact on the economy is expected to wane. This is especially critical for properties in downtown Los Angeles that rely on foot traffic from tourists and sporting and entertainment events.
Occupancy at downtown Los Angeles hotels has been steadily improving since January 2021, when it was around 29%, according to CoStar data. By December, occupancy downtown had reached 65%. Revenue per available room, a metric that tracks hotel performance, also improved over the course of 2021, reaching $117.71 in December, according to CoStar data, up from $32.73 in January.
AEG may be looking at those statistics, and the rebound in hotel values, as an opportunity to bring on a financial partner to reduce some of its risk, said Alan Reay, president of Irvine, California-based hotel brokerage firm Atlas Hospitality Group.
"Investors are attracted to hotel investments as they see the market rebounding and view the sector as a long term good investment and inflation hedge," Reay said. "This is even the case in downtown convention- and business-dependent hotels, which have suffered the most in terms of revenue declines during the pandemic."
"Their decision speaks volumes about their confidence in the future of DTLA hospitality and the area as a whole," said Nick Griffin, executive director of the Downtown Center Business Improvement District. "It would be understandable for an outside investor to be cautious about the market, but to have AEG, one of DTLA’s long time investors and hospitality owners, double down at this time, that shows commitment and confidence."
The 18-story J.W. Marriott has 878 rooms and 134,000 square feet of meeting space, along with a fitness center, rooftop outdoor pool and more. The five-story Ritz-Carlton features 123 guest rooms, the 24 Sky Lounge, a restaurant, spa and business center.