By ELIZABETH HAYES
In one of the biggest L.A. hotel deals in a decade, the Century Plaza Hotel and Tower, where kings, presidents and heads of state have stayed for decades, has been sold by an affiliate of Nippon Life Insurance Co.
The 1,046-room hotel was bought by an investment group led by the Pivotal Group of Phoenix. The new owner plans to undertake a major renovation, even though the hotel's previous owner just recently completed a $25 million upgrade.
While the purchase price was not disclosed, Pivotal told the Business Journal that it will have invested $260 million in the property once its planned renovation is completed.
Pivotal Managing Partner Francis Najafi said the hotel was seen as an attractive acquisition for several reasons, including its strategic location between Santa Monica and Beverly Hills.
"Clearly, it's a combination of location, the quality of the asset and obviously the improving dynamics in the luxury sector of the market in Southern California," said Najafi.
The further renovation will include a remodel of the guest rooms, lobby, ballroom and meeting rooms and upgrades to the pool, spa, landscaping and lighting.
Pivotal also plans to market the hotel and tower as two distinct properties, with the tower becoming a super-luxury hotel in the same class as London's Savoy.
"It's been a prestige hotel, it's catered to presidents of both parties, heads of state. It's also a hotel that would be difficult to replicate today," said Bruce Baltin, senior vice president of PKF Consulting, which tracks the hotel industry and served as a consultant to Pivotal.
The hotel is also in a very strong market. The high-end West Los Angeles hotel market ended 1998 with an average occupancy rate of 71.7 percent, off from 72.7 percent in 1997 but still quite high by historic standards, according to PKF. The average nightly room rate rose to $220, a 10 percent improvement over 1997. Room rates at the Century Plaza range from $350 to $450 per night.
The Century Plaza sale is one of the few such deals transacted in recent months, because financing for commercial real estate acquisitions became scarce after the global financial crisis erupted.
"What's been happening recently is a bit of a gap between buyers and sellers," said Suzanne McConney, director of hospitality services for L.A. with E & Y; Kenneth Leventhal Real Estate Group. "Buyers dropped their (bid) prices, whereas sellers held (to their asking prices) because the fundamentals were there. There's not been a lot of activity because everything was in a stalemate."
The Century Plaza is one of only three L.A. County hotels with 1,000 or more guest rooms. It has more than 100,000 square feet of meeting space, including the largest ballroom in L.A. It was constructed in two phases, with the Plaza completed in 1966 and the Tower in 1985. It is managed by Westin Hotels & Resorts.
Pivotal has been involved in numerous other luxury hotel projects, as well as commercial and residential projects throughout the Southwest. This is the first of what the firm hopes will be a series of luxury-hotel acquisitions in the California.
"We have targeted California as an important market for Pivotal to be involved in," Najafi said.
Other members of the Pivotal-led investment group that acquired the Century Plaza include DMB, also a Phoenix-based real estate firm, and AEW Partners III, an investment fund managed by Boston-based AEW Capital Management LP.
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