SAN DIEGO—In 2010, a year that started in one direction and ended in another, a handful of investors saw prime opportunities and were able forge the right partnerships to take advantage.
Those investments will be recognized in San Diego today at the Americas Lodging Investment Summit, which has been honoring the best new development of the year, single-asset transaction of the year, and merger and acquisition of the year since its inception in 2002.
The nomination process isn’t taken lightly, ALIS chairman Jim Burba said.
“Each awards category is chaired by an industry leader, who has a committee of experts assisting him,” Burba said. “The four committees reach out to the market and into their databases to collect candidates for their respective category.”
In late December each year, Burba said, committee members vote individually for what they believe was the most noteworthy deal from the submissions in their category. The top three recipients of votes cast by the collective committees become the finalists in each category. ALIS attendees then vote to select the winners.
The winners in all four categories were announced at a luncheon in San Diego on 25 January.
As Burba prepared for 2011 ALIS, he said there were more candidates for the mergers and transactions categories in 2010 than there were in 2009, which points to positive signs for the deals market.
“We are clearly not back to 2007 levels, but moving again in a positive direction,” he said. “In fact, the M-and-A award was not given out in 2009, as there was a dearth of M-and-A activity in that year.”
Burba said deal activity in 2011 is starting to look more positive and most experts believe the year will see more property sales in the United States when compared to 2010.
“It wouldn’t surprise me to see an increase in the M-and-A activity as well given all the money that has been sidelined the past few years and the improving industry fundamentals,” he said. “New supply growth isn’t where the big action is … yet.”
Alis award winners
| Development of the Year 2010 | AEG: Marriott complex at L.A. Live. |
| Single-Asset Transaction of the Year 2010 | Omni Hotels & Resorts: Amelia Island Plantation purchase. |
| Merger & Acquisition of the Year 2010 | Centerbridge Partners, Paulson & Company, Blackstone Group: Extended Stay America acquisition. |
| Jack A. Shaffer Financial Advisor of the Year 2010 | Robert J. Webster, managing director, Jones Lang LaSalle. |
Development of the Year 2010
Gatehouse Capital’s development of W Hollywood
Marty Collins is nothing if not patient.
“Maybe a smarter man would’ve given up,” Collins, the president and CEO of Gatehouse Capital, said of Gatehouse’s development of the 305-room, 143-residence W Hollywood Hotel.
Turns out, it’s a good thing he didn’t give up. Gatehouse is a nominee for Development of the Year 2010 this week at ALIS.
The US$375-million project took more than 10 years to come together, the major sticking point being the acquisition of the land where the development would sit. Financing was arranged through HSH Nordsbank AG.
The project was funded via a LIBOR-based loan, the specific terms of which Collins declined to share. “The leverage ratio on the loan, you wouldn’t be able to attain anything toward that today,” he said. “There’s a lot of equity in the deal.”
Collins is happy with how the hotel portion of the development has fared thus far, noting that trailing 28-day revenue per available room is 117% up over its competitive set.
That said, condo sales at the property have been slow, though one or two deals still get done every month. “If we missed,” he said, “that’s where we missed.”
—Shawn A. Turner
AEG develops the Marriott Complex at L.A. Live
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An artist's rendering of the Marriott Complex at L.A. Live in downtown Los Angeles. (Click to enlarge.) |
What a difference a few years can make.
When it was first announced more than two years ago, the multi-billion dollar L.A. Live entertainment complex was met with skepticism. This week at ALIS, the project’s Marriott-led hotel component stands as a nominee for the Development of the Year 2010. The winner of the award will be announced Tuesday, January 25, 2011, during a luncheon ceremony at ALIS.
The hospitality portion, developed at a cost of US$1 billion by the Anschutz Entertainment Group, includes the 878-room JW Marriott, the 123-room Ritz-Carlton and the 224-unit Ritz-Carlton Residences. The properties are management by Marriott International.
Initial uncertainty came from the development’s location. Los Angeles’ downtown area is dominated by government buildings, law offices and banks—a somewhat sterile landscape devoid of the ritz and glamour typical of the city’s swanky enclaves. The L.A. Live complex has since introduced 13 restaurants and bars and some of Los Angeles' most popular entertainment venues such as Club Nokia and Lucky Strike Lanes & Lounge.
The Marriott development is located directly across the street from the Los Angeles Convention Center, one of the West Coast’s largest meetings facilities. It was the 45th property in the luxury brand’s global portfolio.
"This hotel epitomizes the best of the JW Marriott brand and matched with the energy of L.A. LIVE it stands to become a landmark hotel in this city," general manager Javier Cano said in a news release. "With everything from restaurants, clubs, venues to all of the events at Staples Center, Nokia Theatre L.A. Live, the Grammy Museum, Club Nokia Conga Room, and the state-of-the-art Regal Cinema Stadium 14 L.A. Live, the JW Marriott Los Angeles at L.A. Live will be one of the most sought-after destinations for groups as well as business and leisure travelers."
Representatives at both Marriott and Anschutz did not return a message for comment last week.
—Patrick Mayock
Tishman affiliates develop InterCon New York
Affiliates of Tishman Hotel & Realty LP developed the InterContinental New York Times Square at a cost of US$500 million.
Tishman representatives declined to comment on the development.
The 607-room, 36-story property is located in New York’s theatre district at 44th Street and 8th Avenue. The hotel includes one food-and-beverage outlet, 8,000 square feet of meeting space, and street-level retail.
—Jason Q. Freed and Shawn A. Turner
Single Asset Transaction of the Year 2010
LaSalle acquires Sofitel Lafayette
LaSalle Hotel Properties on 1 March 2010 acquired the Sofitel Washington DC Lafayette Square for US$95 million. The 237-room hotel opened in 2002 and is managed by Sofitel’s parent company, Accor SA.
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An exterior shot of the Sofitel Lafayette DC (click to enlarge.) |
This deal is nominated for Single Asset Transaction of the Year 2010 at ALIS. The winner of the award will be announced Tuesday, January 25, 2011, during a luncheon ceremony at ALIS.
The source of the funding for the acquisition was the company’s senior unsecured credit facility, according to LaSalle’s second quarter earnings filing with the U.S. Securities Exchange Commission.
LaSalle’s senior unsecured credit facility is from a syndicate of banks that provides for a maximum borrowing of up to US$450,000. The credit facility’s maturity date is 13 April 2011 with a one-year extension option. Borrowings under the credit facility bear interest at floating rates equal to, at the Company’s option, either LIBOR plus an applicable margin, or an “Adjusted Base Rate” plus an applicable margin. The weighted average interest rate for borrowings under the senior unsecured credit facility was 0.9% and 1.3% for the three months ended 31 March 2010 and 2009, respectively.
In its third quarter earnings statement filed 20 October 2010, LaSalle reported Washington hotels in its portfolio experienced increases in revenue, “primarily as a result of the beginning of an economic turnaround.”
There was a US$1.9-million increase in revenue at six hotels in the market, including the Sofitel. Separately, Liaison Capitol Hill, the seventh D.C. property, saw a US$1.3-million increase.
—Stacey Mieyal Higgins
Omni acquires Amelia Island Plantation
Omni Hotels & Resorts picked up the financially struggling Amelia Island Plantation for US$269,000 per key. The acquisition is a nominee for Single Asset Transaction of the Year 2010.
During a previous interview with the Hotel Investment Barometer, Austin Khan, VP of acquisitions and development, said Omni is putting more of a focus in going after distressed properties.
• Read “Amelia Island deal typifies Omni’s search.”
The company bid US$67.1 million for the property at auction in an all-cash deal. No leverage was needed for the purchase.
“We have our own capital we use to deploy,” Khan said. “We happen to own most of our hotels in a wholly owned structure.”
Omni officials could not be reached prior to deadline.
—Shawn A. Turner
Sunstone buys Royal Palm—Miami Beach
Sunstone Hotel Investors acquired the Royal Palm Hotel—Miami Beach at a foreclosure auction for a gross purchase price of approximately US$117 million, or US$286,000 per key.
“We seek unique opportunities to acquire exceptionally well-located hotel real estate at discount valuations,” then president and CEO Art Buser said in a news release. “Additionally, we seek to acquire assets where we may create meaningful value via comprehensive renovation nd repositioning programs.”
—Shawn A. Turner
Merger & Acquisition of the Year 2010
Consortium purchases Extended Stay America
It was a team effort—and they had to fight off a determined Starwood Capital Group—but a consortium of investors led by Centerbridge Partners, Paulson & Company and Blackstone Group picked up Extended Stay America for approximately US$3.9 billion.
In the process, the group nabbed a nomination for Merger & Acquisition of the Year 2010 at ALIS this week.
Officials at Centerbridge, Paulson and Blackstone all either declined comment or did not return a message for comment last week. But even without comment, the groups’ pursuit of ESA is well-documented.
• Read “ESA sold for US$3.93 billion to Centerbridge-Paulson-Blackstone group.”
Starwood Capital and the Centerbridge/Paulson/Blackstone trio engaged in a tug-of-war over ESA and its 700 hotels comprising 76,000 guestrooms. At one point, ESA accepted Starwood Capital’s US$905-million reorganization plan, only to renege and settle on its eventual acquirer two and a half months later.
• Read “ESA accepts new reorganization plan.”
ESA emerged from bankruptcy in October 2010.
—Shawn A. Turner
Qatari group’s 40% stake in Fairmont
In April 2010, Saudi Arabia-based Kingdom Holding Company announced it sold a 40% stake in Fairmont Raffles Holdings International to Voyager Partners Limited and QD Hotel & Property Investment Limited.
Under the agreements, Voyager acquired a 40% share in FRHI. In addition, QDHP has undertaken to provide FRHI with future management contracts for hotels that will be branded Fairmont, Raffles or Swissotel. QDHP agreed to work closely with its stakeholders and FRHI on branded hotel management opportunities.
The deal is one of three nominated finalists for ALIS’s Merger & Acquisitions of the Year.
Voyager is a private investment entity based in the Cayman Islands. QDHP is a wholly-owned subsidiary of Qatari Diar, the principal real estate investment entity of the Qatar Investment Authority.
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William Fatt, CEO, Fairmont Raffles Holdings International |
Reflecting on the company since the transaction, Fairmont’s CEO William Fatt said Voyager/QDHP has been a constructive shareholder.
“We have a number of new projects, most are new-builds or substantial renovations. Le Royal Monceau (Raffles Paris) is an example of an extensive renovation that we’re working with them on.”
The challenge has been being patient with some major construction projects, he said.
Fatt expects five to 10 projects to come from QDHP during the next few years—and Fairmont expects to open two or three hotels this year in total. The privately held company does not disclose all agreements.
“There are a significant number of projects underway,” Fatt said. “We added 10 hotels last year, including The Savoy (London) and The (Fairmont) Peace Hotel (Shanghai). … We have a big pipeline that will carry us into ’12, ’13 and ’14, and I would guess that a third to a half of that growth will come from the Qatari relationship.”
A Fairmont hotel is in the works for Bern, Switzerland, according to Fatt. The deal has not been formally announced.
Fairmont develops hotels under the Fairmont, Raffles and Swissotel brands.
After the transaction, Kingdom Holding became the second largest shareholder in FRHI and Colony Capital became Fairmont’s third-largest shareholder.
—Stacey Higgins
Thayer/Jin Jiang JV acquires Interstate
Hotel Acquisition Company, a 50-50 joint venture between Thayer Lodging Group V-A LP and Shanghai Jin Jiang International Hotels (Group) Company, in March completed its merger with Interstate Hotels & Resorts.
The price tag on the deal was US$307 million, or US$2.25 per share in an all-cash transaction.
“Interstate offers a unique platform with in-depth industry expertise, international operations, and scope of experience gained over 50 years, along with a stellar reputation as a first-rate operator,” Leland C. Pillsbury, CEO and co-chairman of Thayer, said in a news release.
—Shawn A. Turner