RLJ Lodging Trust
) recently purchased a hotel - Vantaggio Suites Cosmo - in San
Francisco, California for $29.5 million. The move marks the
lodging real estate investment trusts' (REITs), strategy of
acquiring off-market upscale service hotels in vibrant urban
Founded in 1930, Vantaggio Suites Cosmo is three blocks away
from Union Square. Positioned in urban vicinity, the property
enjoys access to a wide variety of leisure and corporate demand
generators. Moreover, it is in close proximity to several tourist
attractions and shopping, restaurant, hotel, as well as
entertainment offerings of San Francisco. The 150-room property
mainly caters to short-term stay rentals.
The deal was funded with available cash and RLJ Lodging plans
to renovate the asset by undertaking multi-phase conversion, with
an estimated investment of $13.0 million. Following the
renovation that is likely to be completed by the end of 2014, the
property would reopen as 150-room Courtyard by Marriott - a
Marriott International Inc.
Additionally, RLJ Lodging expects total investment (including
capital expenditures) to represent a forward capitalization rate
of roughly 7.8%, based on the hotel's projected 2015 net
With the acquisition of the above-mentioned property, RLJ
Lodging now owns 150 properties, including 2 planned hotel
conversions, located across 22 states and the District of
Blooming Leisure Market
San Francisco has a blooming tourism industry, and is one of
the leading tourist destinations and corporate hubs of
technology, finance and biotechnology in the U.S. As per the San
Francisco Travel Association, the year 2012 witnessed visits by
16.5 million tourists. The estimated spending by these travelers
was almost $9 billion - the highest spending level ever
Additionally, according to Smith Travel Research (STR), in
2012, the greater San Francisco area hotel market enjoyed the
third highest revenue per available room (RevPAR) of 12.8% in the
U.S. Moreover, year-to-date through Apr 2013, the market
continues to experience double-digit RevPAR growth.
We expect the acquired property's RevPAR to gain from the
impetus in the leisure and hospitality sectors and high number of
tourist visits. We view the above-mentioned transaction as a
strategic fit for RLJ Lodging as the property's strong brand
connection and prime location would help RLJ Lodging in
experiencing significant growth in San Francisco.
Currently, RLJ Lodging carries a Zacks Rank #3 (Hold). Better
performing lodging REITs include
Sunstone Hotel Investors, Inc.
) - with a Zacks Rank #1 (Strong Buy), and
Host Hotels & Resorts Inc.
) - with a Zacks Rank #2 (Buy).
HOST HOTEL&RSRT (HST): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
RLJ LODGING TR (RLJ): Free Stock Analysis
SUNSTONE HOTEL (SHO): Free Stock Analysis
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