SAN FRANCISCO — Pebblebrook Hotel Trust (NYSE: PEB), a publicly traded REIT that invests in upscale hotels in gateway cities, has acquired the Radisson Hotel Fisherman’s Wharf and Retail for $132 million. The 355-room hotel, which includes approximately 44,000 square feet of street-level retail space, is located in the heart of Fisherman’s Wharf in San Francisco. Davidson Hotels & Resorts will manage the property.
“We’re very pleased with our acquisition of the Radisson Hotel Fisherman’s Wharf and Retail, located in one of San Francisco’s strongest submarkets,” says Jon Bortz, chairman and CEO of Pebblebrook Hotel Trust. “This hotel benefits from an excellent location in the heart of Fisherman's Wharf, which is reflected in the hotel's consistently high occupancy levels and strong cash flows. The property’s diversity of income streams, including the revenue from 44,000 square feet of premier ground-level retail space, coupled with a significant repositioning opportunity, makes the Radisson Hotel Fisherman’s Wharf and Retail another terrific addition to our expanding portfolio.”
The Radisson Hotel Fisherman’s Wharf and Retail occupies an entire block and is bordered by Jefferson, Mason, Beach and Powell streets, across the street from Pier 39. The hotel is situated on San Francisco Bay and offers views of the Golden Gate Bridge and Alcatraz. The hotel is also located adjacent to the ferry terminals serving popular tourist destinations in San Francisco.
The hotel’s immediate area along Jefferson Street is undergoing a $4 million beautification project, creating a pedestrian-friendly, outdoor plaza experience directly in front of the property.
Originally built in 1964 as a 250-room hotel with 14,000 square feet of retail space, the hotel expanded in 1999 with the construction of an additional 105 rooms and 30,000 square feet of retail space. The hotel also underwent a $4.5 million renovation in 2012. The hotel features 1,720 square feet of meeting space and a newly renovated fitness center. The hotel’s guest rooms offer newly remodeled bathrooms, new Sleep Number beds, 37-inch flat-screen TVs, upgraded lighting and contemporary décor.
The retail space consists of 20 units, including food, convenience and tourist-focused retail and service providers. The retail portion is currently 95 percent leased with an average rent exceeding $100 per square foot, according to Pebblebrook.
The hotel REIT plans to invest $18 million to $20 million between 2014 and 2015 to renovate and reposition the hotel, including all guest rooms and public areas, both interior and exterior. Dawson Design Associates, the same design team that repositioned Pebblebrook’s Hotel Zetta in San Francisco, will oversee the Radisson’s renovation. The hotel’s guest room and public area improvements are expected to begin in the fourth quarter of 2014, and Pebblebrook plans to rename the property upon completion of the renovation.
“We are very excited about the opportunity to reposition the Radisson Hotel Fisherman’s Wharf to an upper upscale boutique hotel,” says Bortz of Pebblebrook. “We believe this type of product will be positively received in the vibrant Fisherman’s Wharf market and the comprehensive renovation and repositioning plan that will touch all aspects of the hotel will provide a new and unique guest experience.”
In 2014, Pebblebrook forecasts that the Radisson Hotel Fisherman’s Wharf will generate earnings before interest, taxes, depreciation and amortization (EBITDA) of $10.2 million to $10.7 million and $9.3 million to $9.8 million in net operating income.
Pebblebrook will own a leasehold interest in the property through a ground lease, which currently has 48 years remaining and expires in 2062.
The acquisition of the Radisson Hotel Fisherman’s Wharf and Retail brings the total number of properties in Pebblebrook’s portfolio to 29. The hotel is the company’s fifth investment in San Francisco and second investment in Fisherman’s Wharf.
Pebblebrook Hotel Trust’s stock price closed Tuesday at $30.18 per share, up from $21.73 per share a year ago.
— John Nelson