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Thursday, Mar 28, 2024

Marriott Sale Checking Out

The Warner Center Marriott is being acquired by Century City real estate investment and development firm Laurus Corp. – the latest example of how hotels are the hottest sector in the commercial real estate market. The price for the 474-room corporate lodging at 21850 Oxnard St. being acquired from the Teachers Retirement Fund of Illinois is undisclosed but is expected to be well into the “nine figures,” according to at least one expert. Austin Khan, chief investment officer for Laurus, said his firm was one of several at the buyers table trying to pick up the asset from the retirement fund, which bought the hotel in 2003 for $85.3 million. “Our obligation to our investors is to find great investments, and this is one,” Khan said. “I think that our reputation as being able to quickly assess an opportunity and being able to close has provided us with a competitive advantage.” In the past 18 months alone, Laurus has picked up 10 hotels around the country through its Ethika Investments LLC affiliated private equity fund. Khan said the fund is still trying to raise more capital to buy hotels, with a $200 million goal for the end of the year. He declined to provide information on how much the fund has spent thus far. Laurus isn’t the only company seeing potential in the hospitality market. Trophy hotels have been selling all across the country, from Los Angeles to Manhattan, as occupancy numbers continue to recover from the recession. And that has fueled a push for more development in the sector, with several projects underway or planned in the greater Valley. Bruce Baltin, senior vice president at PKF Consulting USA in Los Angeles, said the L.A. County occupancy rate is hovering around 78 percent, a historically high figure for the industry that is promoting development. Still, he said it’s a good time for the teacher’s pension fund to cash out. “Hotels like this don’t sell everyday, but it’s not entirely that uncommon right now,” he said. “The value of hotels has never been higher, so it’s a really good time for owners to sell. Occupancy is the highest I ever remember seeing it.” The teacher’s fund did not respond to calls or emails seeking comment, and Tishman Hotel & Realty of New York, which was managing the property, declined comment. Kahn said Laurus plans to bring in Evolution Hospitality of San Clemente to run day-to-day operations Adam Christofferson, first vice president and regional manager at the Encino office of Marcus & Millichap Inc., said the Warner Center Marriott sale would “absolutely” eclipse nine figures. “We’re seeing more and more large transactions happening, and not only on the Westside and downtown, but in the Valley,” he said. “This points to the rejuvenation of the area, but it also just points to the strength of the market.” Sellers market The 335,000-square-foot Warner Center Marriott was built on 4.2 acres in 1985, and received some renovations in 2004. The hotel is No. 4 on the Business Journal’s annual list of largest hotels. According to the list, room rates range from about $150 to as high as $470 a night for a suite. The Marriott is a typical business traveler’s hotel. It features 11 suites among its 474 rooms, with amenities including Wi-Fi, a fitness center, indoor and outdoor pools, valet parking and a glatt kosher kitchen. The hotel also has several meeting spaces, including its Grand Ballroom, which measures nearly 11,000 square feet and ranks No. 7 on the Business Journal’s annual list of largest meeting rooms in the region. Marriott International Inc. of Washington, D.C., did not return calls or emails seeking comment, but it’s customary for the corporate flag to approve of hotel transactions. Khan said Laurus already has plans for a top-to-bottom $11 million renovation, including updating the rooms, fitness center, pools and meeting spaces. The company plans to complete the renovations within 18 months. “This place has the potential to be a fantastic property. What it really needs is a group that will focus on reinvesting capital, refreshing the hotel and making it an anchor of the area,” he said. “We really look at opportunities to take assets where we can add that special touch. We want to make it better than it is today.” The company specializes in hotels that service business travelers. Laurus has about a dozen hotels under its corporate umbrella, including the 174-room Doubletree Golf Resort in San Diego; 146-room Hilton Garden Inn in Philadelphia; and a 213-room resort in Cancun, Mexico. Just last month Laurus bought the 296-room San Antonio Marriott Northwest. Its only L.A. area asset is entitlements for 33 luxury condominiums in Beverly Hills. Baltin said the Warner Center Marriott is a good addition to the company’s portfolio. “It is a strong commercial hotel. It obviously caters heavily to the corporate market, but it’s a workhorse. It has always done well as far as I know,” he said. Elsewhere in the city, several large hotels have changed hands in the last nine months, including the $195 million sale of the London West Hollywood in October, bought by Northwood Investors LLC of New York from Blackstone Group. The New York asset management giant then turned around and shelled out $1.73 billion for the Cosmopolitan hotel on the Las Vegas strip in May, after the original developer defaulted and Deutsche Bank AG took control of the asset during the recession. Several corporate hotels near Los Angeles International Airport sold late last year as well, including the Sheraton Four Points LAX, which sold for $56 million in December, and the Sheraton Gateway Hotel LAX, which sold for $96 million in November. Hotel sales nationwide totaled about $2.7 billion in May alone, according to a report from Real Capital Analystics Inc. in New York. That number reflects a 5 percent jump from last year and the firm is forecasting even more substantial growth in the coming months. Next wave With the L.A. area generally considered to be without enough hotel rooms, the recovery has spurred several announced projects downtown as well as in the greater Valley. R.D. Olson Development of Irvine is underway on construction of its $44 million SpringHill Suites by Marriott at South San Fernando Boulevard and East Santa Anita Avenue in Burbank. And that hotel is just 400 feet from a planned 210-room Hilton Garden Inn by FPG Development Group of Palm Beach, Fla. In addition, more hotels could be coming to Warner Center in the next few years. The Warner Center 2035 Specific Plan, passed by the city in October, includes development guidelines that could bring more than 42,000 residents and nearly 49,000 jobs to the area over the coming decades. “We really believe that this area is poised for growth,” Khan said. “This is going to be the hub of commerce in the San Fernando Valley going forward.” The specific plan offers developers streamlined entitlements, almost no height restrictions for construction and flexible parking requirements. Australian mall developer Westfield Group LLC had originally planned to construct a 158-room business hotel as part of the first phase of its 550,000-square-foot Village development. The company announced in March it was holding off on construction but could restart the project. And plans for a 47-acre site at Canoga Avenue and Victory Boulevard contain a mix of residential, office, retail and hotel space. The $3 billion project is being designed by Boston Global Investors for land owner United Technologies Corp. of Hartford, Conn. “I believe there is certainly room for more rooms right now,” said Christofferson, the broker. “Multiple parties will build more product in the West Valley. It’s got to happen.”

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