PORTLAND, ORE. — Pebblebrook Hotel Trust has acquired The Nines Hotel in Portland for $127 million. The 331-room hotel is located on SW Morrison Street, across from Pioneer Square downtown.
The Nines is in close proximity to Pioneer Place Mall, Saks Fifth Avenue, Nordstrom, Nike Town, the Pearl District and the Portland Center for the Performing Arts. Nearby employers include US Bank, Deloitte, NRC, Wells Fargo, Intel and Nike.
Pebblebrook acquired a fee simple condominium interest in the hotel. The historic building was originally constructed in 1909. Back then it was the Meier & Frank Building. The property underwent a $140 million adaptive reuse renovation and reopened as The Nines in October 2008.
“This hotel represents our third hotel investment in Portland’s central business district, and the property’s desirable location across from Pioneer Square ideally places it near many of downtown Portland’s most notable demand generators,” says Jon Bortz, Pebblebrook’s chairman and CEO. “The hotel’s excellent downtown location and strong operating fundamentals, including its position as the market’s rate leader, make this acquisition an outstanding addition to our high-quality portfolio.”
The hotel occupies floors six through 15 of the building, as well as portions of the first floor and basement. A Macy’s flagship store occupies the first five floors and most of the basement.
The Nines features 13,500 square feet of meeting space, a library with billiards, a 24-hour fitness center, a business center, a club lounge, and two restaurants, Urban Farmer Steakhouse and Departure Restaurant and Lounge.
The hotel operated at 88 percent occupancy in 2013. It boasted an average daily rate of $193 and room revenue per available room (RevPAR) of $170.
Pebblebrook forecasts that the hotel will earn between $12 million and $12.6 million before interest, taxes, depreciation and amortization. It also forecasts a net operating income after capital reserves of $10.4 million to $11 million.
Pebblebrook is assuming three secured, non-recourse loans totaling $50.7 million. The loans are subject to a weighted average interest rate of 7.4 percent. Each loan matures on March 5, 2015.
The company will also invest between $6 million and $8 million to update guestrooms and public areas. These renovations are expected to commence in the fourth quarter of 2015.
The property will maintain its association with Starwood’s Luxury Collection brand and will continue to be operated by Sage Hospitality and Sage Restaurant Group. Pebblebrook will assume the hotel’s existing franchise agreement with Starwood’s Luxury Collection. The Nines Hotel will continue to be managed by Sage under a new hotel operating agreement.
Bethesda, Md.-based Pebblebrook Hotel Trust is a publicly traded real estate investment trust that acquires and invests primarily in upper upscale, full-service hotels in urban markets in major gateway cities.
It owns 31 hotels, including 25 wholly owned hotels with a total of 6,046 guestrooms and a 49 percent joint-venture interest in six hotels with a total of 1,775 guest rooms.
Pebblebrook’s stock price closed Thursday, July 18, at $36.94 per share, up from $27.95 per share a year ago.
— Nellie Day