When many large hotel chains are selling properties these days, Global Hyatt Corp.’s anticipated take-over of the Century Plaza may not be out of line.
Hyatt will manage the hotel, but the property will be purchased by Sunstone Hotel Investors Inc., a San Clemente-based real estate investment trust that specializes in buying high-end hotel properties.
The arrangement is another example of how hotel companies operate today. Instead of owning the hotel outright, a separate company buys the property and the hotel firm enters into a long-term management contract.
“Hyatt can take a more strategic, long range view to how they spend their money,” said Bruce Baltin, a senior vice president with hotel tracking firm PKF Consulting.
The price, $403,000 for each of its 728 rooms, is a record-setting amount for a California hotel, according to Alan X. Reay, president of hotel brokerage and consultancy Atlas Hospitality Group Inc. “That’s going to be the highest price per room paid this year,” said Reay, who was not involved in the deal.
Bidding on the Century Plaza was very aggressive, according to several sources close to the transaction. Starwood Hotels & Resorts Worldwide Inc., a publicly traded company, was a runner-up to buy the property but in the end couldn’t top Sunstone’s offer.
Baltin said the price isn’t out of line. “It’s aggressive but it’s not out of step,” he said. “The Century Plaza is an asset companies are willing to accept lower returns on because it’s such an important hotel.”
The purchase also gives Hyatt staying power in the L.A. market. The company lost control of downtown’s Hyatt Regency Los Angeles when the hotel was sold earlier this year. It is now called the Sheraton Los Angeles.
Hyatt will continue to manage the nearby 366-room Park Hyatt Los Angels, also in Century City, according to Hyatt spokeswoman Katie Meyer. The Park Hyatt is owned by Tokyo-based Sumitomo Realty & Development Co. Ltd.
In L.A., Hyatt owns and manages only one hotel the 262-room Hyatt West Hollywood, located on the Sunset Strip.
Calls seeking comment from Sunstone weren’t returned. Francis Najafi, chairman and chief executive of Pivotal Group, which owns the Century Plaza, declined to comment.
Pivotal Group was represented in the deal by Steven L. McKenzie, a managing director at Eastdil. McKenzie declined to comment.
Tri-Cities Trifecta
Chicago pension fund advisor LaSalle Investment Management Inc. has agreed to buy 505 N. Brand Blvd. from CB Richard Ellis Investors, a division of brokerage CB Richard Ellis Group Inc., for about $116 million, according to sources close to the deal.
Despite the city’s flat leasing market, the LaSalle purchase shows that investors continue to pay top dollar for Glendale office buildings. LaSalle is paying about $345 a foot for the 15-story white-and-black checkered property.
The 338,310-square-foot building, which opened in 1992, is 84 percent leased. Asking rents are between $2.45 and $2.55 a foot, according to commercial real estate tracking firm CoStar.
Last week, Des Moines pension fund adviser Principal Global Investors LLC agreed to pay Tishman Speyer Properties Inc. about $110 million, or $314 a foot, for 101 N. Brand Blvd., a 350,000-square-foot tower. The lower price reflects the building’s higher vacancy levels.
At the end of June, Glendale’s office buildings were, on average, 14.4 percent vacant and the premier buildings had asking rents of $2.43 a foot, according to Grubb & Ellis Co. Glendale’s average vacancy rate is higher and the asking rents lower when compared to the countywide average.
CB Richard Ellis’ Tom Bohlinger represented both sides in the sale of 505 N. Brand Blvd. Bohlinger declined comment.
Meanwhile, real estate activity remains strong in Burbank and Pasadena which, along with Glendale, makes up the Tri-Cities submarket.
Kennedy Associates Real Estate Counsel Inc. is selling its 155,000-square-foot office building at 2950 Hollywood Way in Burbank. The office building, named IDT Entertainment Plaza after its main tenant IDT Entertainment Inc., is 80 percent leased.
Bohlinger, who has the listing, said there are pending leases that could fill the remaining vacant space. “The (Burbank) market has been on fire,” he said. “Though it’s not fully leased, we have proposals from tenants that would shortly take up the remaining space.”
The project, formerly called Burbank Airport Plaza, was completed in 2001 by Kennedy and Trammell Crow Co.
In Pasadena, IDS Equities LLC is buying a 67,000-square-foot building at 80 S. Lake St. from Davenport Partners Inc. for about $19.3 million. The 38-year-old building, at the corner of Lake Avenue and Green Street, is 95 percent occupied, mostly by smaller tenants. A Wells Fargo & Co. branch occupies the ground floor.
IDS Equities is being backed with money from the California State Teachers Retirement System.
Leaving Santa Monica
Law firm Van Etten Suzumoto & Becket LLP has signed an 11-year lease for 50,000 square feet at 1800 Century Park East in Century City worth nearly $25 million.
For the last six years, the law firm had been leasing two non-contiguous floors in the Water Garden complex in Santa Monica. The new space comprises three floors connected by an internal stairwell. Van Etten Suzumoto & Becket expects to relocate to its new Century City address beginning in February 2006.
The building is owned by a California State Teachers Retirement System fund managed by CBRE Investors.
The landlord was represented by Annie Kodak, Kevin O’Donnell and Stan Gerlach of CB Richard Ellis. Van Etten Suzumoto & Becket was represented by Robert Chavez of Guardian Commercial Realty.
*Staff reporter Andy Fixmer can be reached by phone at (323) 549-5225, ext. 263, or by e-mail at
[email protected]
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