Ashford buys luxury in San Francisco

24th Feb 2006

Ashford Hospitality Trust has signed a definitive agreement to acquire the AAA
four-diamond 338-room Pan Pacific San Francisco Hotel.Ashford are buying from W2001 Pac Realty, L.L.C., a joint venture between Whitehall Street Global
Real Estate Limited Partnership 2001 and affiliates and Oxford Lodging
Advisory & Investment Group, LLC for $95.0 million in cash ($281,065 per key).
The acquisition is expected to close within 45 days.
  Ashford will re-brand the hotel with a well-known luxury flag under a long
term management agreement, and invest at least an additional $10 million in
the re-branding and renovation of the hotel. The renovation, which is expected
to commence immediately, consists of revenue enhancing upgrades to meeting
space, rooms and food and beverage facilities. The hotel recently completed a
$3.8 million renovation in 2004.
  On a forward twelve-month basis, the purchase price equates to a 12.2x
EBITDA multiple, an EBITDA yield of 8.2% and a net operating income
capitalization rate of 6.5% with projected revenues of $32 million. The
purchase price equates to a trailing twelve-month net operating income
capitalization rate of 3.9% and a 5.0% EBITDA yield. The property generated
revenues of $25.5 million for the calendar year 2005.
  Located at the corner of Post and Mason Streets in the Union Square
district, the Pan Pacific San Francisco is within walking distance to world
famous San Francisco destinations such as the Financial District, Chinatown,
theaters, upscale shopping, Embarcadero Center, Nob Hill, and the Moscone
Convention Center. Built in 1987 and renovated in 2004, the property features
338 luxury rooms, 17,500 square feet of meeting space, a state-of-the-art
conference center and two food and beverage facilities. The property is owned
under a ground lease which has a term expiring in 2083.
  Monty J. Bennett, President and CEO of Ashford Hospitality Trust, said,
“San Francisco’s hotel market is poised for a dramatic turnaround like that
experienced in New York. Based on the RevPAR results posted in 2005 and the
projection for mid-teen’s growth in 2006, we believe San Francisco will be one
of the preeminent growth markets in the U.S. We have evaluated investment
opportunities in San Francisco for some time and with this hotel we have found
a very attractive entry into the market. This hotel’s competitive set has
experienced RevPAR increases of close to 25% over the last six months while
the hotel has trailed that pace with only 12.7% growth in the same period.
With the conversion to a well-known luxury brand, an excellent location and
the significant upgrading of the hotel’s amenities, we believe we have a
tremendous opportunity to outpace the expected strong growth in the San
Francisco market. We also intend to explore the value-added possibility of
converting the existing Executive Conference Center to a high-end
bar/restaurant, retail or downtown day spa concept later in the year that
would further enhance the growth of the hotel.”


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