| By Anwar Elgonemy, Vice President, Jones Lang LaSalle Hotel, San
Francisco
San Francisco Commands Top Interest Among U.S. Cities
July 2005
-
An almost frenzied competition for assets has shifted cap rates down to
their lowest level on record.
-
San Francisco has highest investor demand - there is extremely limited
product on the market and the market has the highest imbalance of demand
for hotels vs. hotels for sale.
-
In Jones Lang LaSalle Hotels� most recent Hotel Investment Sentiment
Survey, investors indicated that they targeted an average 8.9% cap
rate for 18 top U.S. hotel markets, with New York, Hawaii and San Francisco
at the low end. San Francisco is at 8.2%.
-
Given the steep reduction in NOI that most hotels have experienced, it
is doubtful that any hotel in San Francisco trades at the above "targeted"
cap rate - in fact, actual cap rates are more likely to be half that amount.
Overview of San Francisco Properties Valued
at Over $10 Million Sold since 2002
| Property |
Date
|
No. of Rooms
|
Price per Room
|
Buyer
|
| Sir Francis Drake |
07/05
|
417
|
$120,000
|
Oxford Lodging |
| The Clift Hotel |
07/04
|
373
|
$190,000
|
DivcoWest Properties |
| Pickwick Hotel |
02/04
|
188
|
$75,000
|
LA Koreana |
| Pan Pacific Hotel |
08/03
|
329
|
$137,000
|
Oxford Lodging |
| Vintage Court Hotel |
07/03
|
107
|
$102,000
|
Executive Hotels & Resorts |
| Courtyard by Marriott |
07/02
|
405
|
$202,000
|
CNL |
New Construction Projects, Plus Two More Approved
-
189-room Hotel Vitale opened in March and 276-room St. Regis set to open
in November.
-
$195M, 550-room Inter-Continental targeted to open in summer 2007.
-
Two other projects have approval: 86-room Orchard Garden Hotel at 466 Bush
Street and a 120-room extended-stay hotel at 301 Mission Street.
-
Re-development of Ferry Building/Embarcadero is energizing the Financial
District.
San Francisco Hotel Projects since 2002
|
Hotel/Location
|
Total Development Cost
|
Total Cost per Room/ Opening Year
|
Hotel Rooms
|
| Inter-Continental/SOMA |
$195,000,000 **
|
$354,000/in 2007
|
550
|
| St. Regis Museum Tower/SOMA |
$138,000,000 1
|
$500,000/in 2005
|
276
|
| Hotel Vitale/Embarcadero |
$53,800,000 **
|
$270,400/in 2005
|
199
|
| The Argonaut/Wharf (reconfiguration) |
$41,194,000 **
|
$163,000/in 2003
|
252
|
| Omni/Financial District (reconfiguration) |
$100,000,000 **
|
$277,800/in 2002
|
360
|
| Guest Quarters/Financial District |
$53,622,000
|
$151,900/in 2002
|
353
|
| 1 Estimate. ** Excluding land cost |
Market Assessment � S.F. Occupancy
Projected at 75% for 2005
On the mend: San Francisco�s hotel market is in recovery after bottoming-out
in 2002-03.
The overall hotel occupancy rate in San Francisco is projected to be 75%
in 2005, about the same as 1995, before the dot-com run-up.
Overall city occupancy increased to 73.2% in 2004; ADR up by 1.7% to $147.
Nob Hill/Union Square/Moscone sub-market experiencing strongest increase
in occupancy at +4.0% over 2004.
The increasing occupancy in San Francisco will have a pronounced impact
on all western U.S. markets as discounting in San Francisco has been felt
up and down the coast, and as far east as Denver.
. |
