(IND) Center City Philly's biggest hotel sold, cheap

Host Hotels & Resorts Inc., Bethesda, Md., says it has sold an 89% stake in the 1,400-room Philadelphia Marriott Downtown on Market St. to investors Oaktree Capital Management LP, of Dallas, and Clearview Hotel Capital LLC, for a price that translates to a "gross entity value" of $303.4 million ($217,000 per occupant, or "key",) Host Hotels & Resorts, Inc. said today. Host Hotels will keep the remaining 11%, chief vice president Struan B. Robertson said in this statement.

Host Hotels had hoped to collect as much as $325 million, as I reported here.  Host executives have said they sell hotels when they decide a market face a period of slow growth -- though as a real estate investment trust, Host is often buying and selling hotels to maximize profits and minimize tax liabilities.

For guests and workers, "nothing changes," Robert Allen, general manager for operator Marriott Corp., told me. "2013 was the busiest year ever for this hotel. We're doing very well." In a statement to workers, he added that management expects a 'similarly successful 2014."

Allen wouldn't detail the hotel's occupancy rate, but noted Host is the third of three owners the hotel has had in 19 years, and has also been selling other hotels: "It is a business transaction." Marriott has more than 30 years to run on its 50-year agreement to run the hotel, he added.

Like some other cities, Philadelphia has suffered from a lack of major convention business as well as continued construction of new, taxpayer-subsidized hotels.

For example, developer Brooks Lenfest and his partners want to spend $280 million (equity, borrowed, and taxpayer-funded) building 700 rooms ($400,000 a key) of Element and W hotels, among other hotel projects now proposed for Center City. Developer Dennis Maloomian's proposed Aloft hotel adjoining the Convention Center (with at least $2 million in state funding) and developer Robert Zuritsky's new HomeSuites, also on Broad, add to the supply, as have the high-end Palomar, La Monaca and Le Meridian hotels in recent years, which have proven so popular among high-end guests that clients of the Four Seasons on Benjamin Franklin Parkway are concerned whether that hotel, one of the chain's lowest-priced in the U.S., will be able to keep the brand. Four Seasons officials were unavailable for comment.

State subsidies "are needed for the most recent hotel developments, and some multifmily developments," since Philadelphia has "New York-level labor and construction costs" but room rates and revenues that are just "a fraction of what you get in New York and Boston and D.C.," Robert Fahey, executive vice president in the Philadlephia office of national commerical property broker CBRE Inc., told me.

Source: Philly.com