“We are very excited about the acquisition of one of the most recognizable hotels in West Hollywood,” said Jon Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “The hotel is positioned along Sunset Boulevard in what is arguably one of the best hotel markets in the United States. The hotel is an iconic destination within West Hollywood and benefits from a strong mix of leisure and corporate transient demand, with further upside expected from the extensive renovation that was completed in 2008. Mondrian Los Angeles is an excellent addition to our growing portfolio and it’s forecasted to provide attractive risk-adjusted returns going forward.”
Mondrian Los Angeles is located in the West Hollywood area of Los Angeles, California, along the legendary Sunset Strip. West Hollywood is a 1.9 square-mile city that is bounded by Beverly Hills, Hollywood, Los Angeles and the Santa Monica Mountains, and is home to exceptional shopping, dining and entertainment. The Sunset Strip, a mile-and-a-half stretch of Sunset Boulevard, runs from the eastern border of West Hollywood and Hollywood to the western border of West Hollywood and Beverly Hills. Famous for its wall-to-wall advertising and generally known as “The Strip,” this portion of Sunset Boulevard houses a premier collection of restaurants, boutique shops, nightclubs and bars that are famously visited by movie stars, rock stars and other high-profile entertainers.
The Beverly Hills/West Hollywood market has experienced extremely constrained supply growth over the past 20 years and has historically been subject to strong market recoveries, exhibiting a double-digit compounded annual rooms revenue per available room (“RevPAR”) growth rate during the last recovery cycle. Moreover, the greater Los Angeles area is one of the most-visited metropolitan markets in the United States, welcoming over 25 million visitors per year to the wide array of shopping outlets, entertainment industry activities, sporting and music events, museums, nightlife, dining establishments and theme parks the area has to offer.
Originally constructed in 1959 as an apartment building and later converted to a hotel in 1996 by Morgans, Mondrian Los Angeles is the original boutique-style Mondrian hotel and is located along the Sunset Strip at the base of the Hollywood Hills. The hotel features 237 luxurious guest rooms that offer stunning views of Los Angeles, the Hollywood Hills and Sunset Boulevard, along with over 1,200 square feet of meeting space. During the third quarter in 2008, the hotel completed a comprehensive $39.0 million ($165,000 per room) renovation that featured designs by the renowned Benjamin Noriega-Ortiz and included a total redesign of the guest rooms, bathrooms and public spaces. The hotel boasts three food and beverage outlets, Asia de Cuba, ADCB and SkyBar. Asia de Cuba is a three-meal-a-day restaurant that features an innovative Asian-Latin fusion menu with indoor and outdoor seating, while ADCB is the lobby bar that offers sushi, sake and nightly specialty drinks. SkyBar is one of the premiere Los Angeles nightlife destinations, with an open air, ivy-covered pavilion and some of the best views of Los Angeles. The hotel also offers the agua Spa, which is a full-service salon that features a wide variety of upscale massage, skin care and body treatments, a 24-hour fitness center that includes state-of-the-art fitness equipment, a full-service business center and on-site valet parking.
In 2010, Mondrian Los Angeles operated at 71% occupancy, with an average daily rate of $257. During the next 12 months, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of approximately $9.0 to $9.7 million and net operating income after capital reserves of approximately $7.7 to $8.4 million.
The hotel will continue to be managed by Morgans Hotel Group, which has managed the hotel since 1996.
“We’re thrilled to be working with the Morgans Hotel Group at Mondrian Los Angeles and to further expand our operator relationships,” continued Mr. Bortz. “They have been a pioneer with their boutique hotels and together we’re confident we can provide market-leading performance at Mondrian Los Angeles.”
Michael Gross, CEO of Morgans Hotel Group said, “Morgans is pleased to be partnering with Pebblebrook Hotel Trust at Mondrian Los Angeles. Pebblebrook understands the unique and exciting experience that our guests expect from a Mondrian and we look forward to working together to further enhance that experience at this iconic property and flagship of the Mondrian brand.”
The Company expects to incur approximately $0.4 million of costs related to the acquisition of this hotel that will be expensed as incurred.
Mondrian Los Angeles marks the twelfth acquisition for the Company, comprising $1.0 billion of invested capital since completing its initial public offering in December 2009.