Sunstone Hotel Investors Inc., a San Clemente-based real estate investment trust, has made its first purchase on the Westside, paying $22 million for the 168-room Pacific Shore Hotel in Santa Monica.
Sunstone acquired the Ocean Boulevard hotel from Motels of America Corp. Brokering the sale was Atlas Hospitality Group of Costa Mesa.
The Pacific Shore, a mid-range hotel, needs "substantial renovation," said Alan Reay, president of Atlas.
"They plan to reposition it as an upscale, luxury hotel," he said, adding that it would be slightly less upscale than the nearby Loews Santa Monica Beach Hotel and Shutters on the Beach.
Pacific Shore also is not far from Le Merigot Beach Hotel, a nine-story project being built on the beach between Loews and Shutters. That $30 million project is expected to open in December and will be the last beachfront hotel allowed in Santa Monica because of a 1990 ballot measure that established a moratorium on such projects.
Pacific Shore, besides being "slightly less upscale" than the other hotels nearby, also is considerably less desirable from a view standpoint. Unlike the other properties, it is not on the ocean side of Ocean Boulevard.
Sunstone's purchase of the Pacific Shore runs counter to the general trend among hotel REITs, which lately have seen their share prices tumble.
"A lot of REITs put the brakes on (hotel buys). (Sunstone) is one of the few that was under contract when the market was in a tailspin and they still closed because they recognized the strength of Santa Monica and L.A.," Reay said.
Meanwhile, Sunstone has been selling some of its out-of-state hotels.
Sunstone owns 57 hotels, among them the Hilton in Carson and the Courtyard by Marriott on Century Boulevard near Los Angeles International Airport.
Bullish on Hollywood
Numerous retail projects are being planned for Hollywood's way, even though Tinseltown's office market has been fairly lukewarm, with a vacancy rate hovering around 19 percent.
But Kennedy-Wilson Inc. sees a lot of potential, as evidenced by the company's recent investments in the area.
It just recently closed escrow on the 160,000-square-foot office building at 7080 Hollywood Blvd. Real estate sources placed the purchase price at about $19 million, and the company plans to invest another $2 million in improvements.
In addition, Kennedy-Wilson is currently in escrow to buy the 300,000-square-foot office building at 6255 Sunset Blvd. for about $30 million.
"We think the Hollywood area is on an upswing and we expect to do well," said Freeman Lyle, Kennedy-Wilson's executive vice president and chief financial officer. "It's been our typical approach to get into areas before the bulk of investors take notice."
Nick Kanieff, president of Kennedy-Wilson's commercial real estate group, said the average monthly Hollywood office rent has risen from $1.35 per square foot a year ago to $1.75 today.
Kennedy-Wilson took the same approach in Santa Monica in 1994 and 1995, snapping up properties before the market heated up. It also bought an office building in the Miracle Mile area earlier this year.
"Downtown, Miracle Mile and Hollywood are our three target areas," Lyle said.
Kennedy-Wilson recently moved to Beverly Hills, a result of its acquisition of Heitman Properties, whose local offices were based there.
The company also recently purchased three debt portfolios with an aggregate book value of $29 million. One of those note pools, with a book value of $9 million, was acquired by a joint venture between the company and East West Bank. The notes are secured by California real estate.
Kennedy-Wilson will either settle the notes for cash, restructure them or initiate foreclosure proceedings on the real estate assets.
Westlake District upgrade
The MacLeod Partnership of Los Angeles expects to complete renovation of its Sheraton Townhouse by the end of the year. The Sheraton apartment house at Wilshire Boulevard and Commonwealth Avenue, near Lafayette Park was originally built in 1929.
The renovation is mainly to the interior, which had to be essentially gutted. When the building reopens, it will have 142 units with one to four bedrooms for low-income seniors and families with children.
The remodel was designed by Santa Monica-based Killefer Flammang Purtill Architects and will retain many of the property's luxurious amenities, including the swimming pool and gardens. New additions include a community room, library, day-care facility and music room.
The building was originally designed by Norman Alpaugh and features a stone base with decorative balustrade and white cornices.
The $18 million renovation project is the centerpiece of a full-square block renewal being spearheaded by MacLeod, in partnership with the Pacific Asian Coalition in Employment. The L.A. Housing Department provided a $5.7 million loan for the renewal.
A full-service market and neighborhood retail facilities will adjoin the renovated Townhouse, said developer Robert MacLeod.
News & notes
Santa Clarita-based Intertex General General Contractors has negotiated a $6 million contract with Lincoln Property Co. to provide general construction services on Lincoln's Rye Canyon Business Park in Valencia's Industrial Center. Site improvements and renovations are underway on the 300,000 to 450,000 square feet of buildings that were originally built in the 1960s for Lockheed Corp. Jamie Wark just bought a two-story office building at 2525 Ocean Park Blvd. in Santa Monica for use by an event management and promotions company. The property was sold by the W & H; Fletcher Trust for $1.8 million. Cushman Realty Corp. represented the buyer and John Bertram with Westmac Commecial Brokerage represented the seller. Daiwa Finance Corp. has expanded its operations with its recently opened Westwood office, at 10990 Wilshire Blvd., which will focus on origination of commercial mortgages in the Western United States. Harkham Industries, a designer and manufacturer of sportswear, dresses and shoes for women and girls, bought a 120,000-square-foot industrial building in Vernon for $4.3 million. The building, at 4890 Alameda St., will serve as the company's corporate headquarters and house its design and distribution facilities. Harkham plans to relocate there by the end of the year from its current location in the downtown garment district. Bart Pucci of Grubb & Ellis Co. represented both the buyer and the seller, Pan Metals Corp. of Korea.
Staff Reporter Elizabeth Hayes can be reached at (323) 549-5225 ext. 229.
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