Hilton Hotels Corp. has decided to sell several of its owned properties with an eye toward “balancing” revenue streams, according to Robert M. La Forgia, the company’s chief financial officer.
Beverly Hills-based Hilton already has listed two portfolios, each containing five properties across the country. One pool consists of suite-style hotels, and the other full-service hotels.
“We’re testing the market right now,” said La Forgia. “If we don’t get our prices, then we’re not going to be sellers.”
Hilton has also listed its famous Palmer House hotel in Chicago for individual sale, with Jones Lang LaSalle Hotels getting the listing. The company is internally selling several Homewood Suites properties.
“It’s a hot transaction market right now,” La Forgia said. “It’s a seller’s market for hotels, and we’re going to be opportunistic sellers. We’re going to have select properties in markets we feel are strong.”
In recent years, most large hotel companies have reduced their ownership of properties in favor of locking in long-term management contracts that have proven to be more profitable.
Will Marks, an analyst with San Francisco-based JMP Securities, doesn’t expect any drastic changes. “This has been something they’ve been discussing for some time,” he said, “but as far as I know they aren’t interested in selling everything off.”
La Forgia said the listings are part of Hilton’s strategy to balance out its revenue streams.
Currently, 53 percent of the company’s earnings come from hotels it owns, 37 percent from hotels it manages and another 10 percent from timeshare properties, La Forgia said.
“We would like to be a little more balanced from fee business and owned business and at the same time grow our timeshare business,” he said.
La Forgia said Hilton hasn’t made plans for proceeds from sales. Last year, the company said it would increase its cash flow to $1 billion over the next three years.
Archstone’s Marina
Apartment giant Archstone-Smith Trust has gobbled up two Marina del Rey apartment buildings in a $151.3 million deal.
Archstone, one of the country’s largest publicly traded apartment owners, has purchased the Chateau Marina and Fiji Villas, which contain 508 apartments. The sale price breaks down to about $298,000 per unit.
EMC Financial sold the luxury apartment buildings, which feature a shared concierge desk, a fully equipped fitness center and a 40-seat theatre.
Last March, Archstone bought the 623-unit Kingswood Village Marina in Marina del Rey for $87 million. The county agreed to extend the Kingswood ground lease termination date by 20 years in exchange for Archstone paying for a $25 million renovation of the property, which is under way.
The Englewood, Colo.-based REIT has been an active buyer of Los Angeles apartment buildings, especially Westside properties.
Ryan Smith and Brad Sevier, senior vice presidents at Buchanan Street Partners, represented both sides on the deal. Buchanan, an investment and brokerage firm, sold its Premier at City Place to Archstone for $44 million over the summer.
Supply Side
When it comes to L.A.’s housing market, it’s all about supply-side economics, said Robert Kleinhenz, a deputy chief economist with the California Association of Realtors.
December’s 2.4 percent dip in the L.A. County median price from the previous month, to $463,450, had a lot to do with a slight rise in the number of homes put on the market, Kleinhenz says.
The increased supply eased pressure on buyers in the market and allowed for greater activity to take place. Accordingly, December sales were 7.8 percent higher than November and 1.5 percent higher than the year before.
The supply of homes compared with the level of demand is so tight that even the slightest increase or decrease registers almost immediately, Kleinhenz said.
The association measures the supply by creating a ratio of the number of homes sold in a month compared to the total supply on the market. At the beginning of 2004, there was a 1.2-month supply of homes on the market not the lowest amount recorded but close. During those early months of the year there was the greatest appreciation in values, and the median priced home in L.A. County topped $425,000.
By August, the inventory of homes swelled to a nearly 6-month supply, allowing prices to hover relatively unchanged for several months. By November, the supply of homes dropped again to 3.4 months and the median priced home surged to $474,720.
“The market really changes to reflect these supply issues,” he said. “Increases in supply can ease tensions on price appreciations.”
Downtown Deal
Capital Group Cos. has inked a 106,000-square-foot deal worth nearly $40 million at 400 S. Hope St., according to sources close to the deal.
The mutual fund giant signed a 12-year lease last month with O’Melveny & Myers LLP, which owns the 705,000-square-foot building called the Mellon Bank Center.
Capital Group’s headquarters are diagonally across the street in the Bank of America Plaza, located at 333 S. Hope St. Last year, Capital Group renewed and expanded its lease at 333 S. Hope St. to 350,000 square feet.
With Bank of America Plaza nearly full, the company opted to find space in a nearby building. Bruce Asper and John Zanetos with CB Richard Ellis Inc. are in charge of leasing at 400 S. Hope St. Asper declined comment.
Capital Group spokesman Chuck Freadhoff said the space was needed to add new employees.
Dennis Smith, with commercial brokerage Travers Realty Corp., said the lease was significant for downtown’s Bunker Hill submarket, where he said vacancy rates in the high-end skyscrapers are below 10 percent and landlords are asking for $2.50 a foot.
Staff reporter Andy Fixmer can be reached by phone at (323) 549-5225, ext. 263, or by e-mail at
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