Hotel REIT Selling Local Property
By ANDY FIXMER
Reeling from the weight of $1.6 billion in long-term debt and an ailing hotel industry, MeriStar Hospitality Corp Inc. is seeking to sell one or more of its Los Angeles area hotels.
The company, the third largest hotel real estate investment trust in the nation, has put more than 30 of its 105 properties on the market nationally, including the Hilton Port of Los Angeles/San Pedro.
The company also owns the Courtyard by Marriott Century City/Beverly Hills and the Santa Barbara Inn, which area hotel brokers said were also on the market.
MeriStar, based in Washington, D.C., denied actively marketing the Century City and Beverly Hills properties, although a company spokeswoman said there may be on-going discussions with interested buyers.
“I’m not saying people aren’t interested in those properties but they’re not part of the current package,” said spokeswoman Melissa Thompson. She declined to discuss asking prices or what the company paid for its local properties.
In a May 8 conference call, MeriStar Chairman and Chief Executive Paul Whetsell said, “There’s a couple more I consider swing properties, but for the most part we are looking at keeping a portfolio of 70 properties.”
MeriStar estimated the sale of the 30 properties will raise between $275 million and $300 million.
Real estate and hotel industry sources said MeriStar paid about $7 million for the San Pedro Hilton in 1997, $12.6 million for the Century City property in 1998, and $8 million for the Santa Barbara Inn in 1999. They could have appreciated by 12 percent to 20 percent based on real estate values alone, the sources said.
MeriStar also owns the Marriott Los Angeles Downtown, the Courtyard by Marriott Marina del Rey, and the Hilton Irvine/Orange County Airport.
Whetsell said in the conference call that potential buyers have tended to be local and regional operators. He said large institutional buyers have shied away.
Interstate Hotels Corp., a company formed by MeriStar to manage its hotels, will continue to operate about 25 percent properties being sold. Interstate currently manages the Westin Bonaventure, the largest hotel in L.A. County, and the Marriott Los Angeles Downtown.
The company is selling the properties to address questions about liquidity, Whetsell said in the conference call. He said the company wants to pay down debt and increase its cash on hand to $80 million from $60 million with the sales.