Blackstone Group LP (BX) invested about $70 million for a controlling stake in San Francisco’s Parc 55, giving the firm its third hotel in the best-performing U.S. lodging market, said two people with knowledge of the deal.
Blackstone, the New York-based private-equity firm that owns the Hilton Worldwide chain, will hold 75 percent of Parc 55, and Boston-based Rockpoint Group LLC, which already held a stake in the hotel, will own most of the rest after investing $10 million of new equity, said the people, who asked not to be identified because the information is private.
Archon Group LP, a unit of Goldman Sachs Group Inc. (GS), provided $152 million of debt financing to the new owners, according to one of the people.
Blackstone is betting on future growth in one of the U.S.’s strongest travel markets. San Francisco ranked first nationwide in increases in hotel occupancy and room rates among the country’s 25 largest hotel markets, excluding Las Vegas, in the week ended March 10, according to Smith Travel Research Inc. of Hendersonville, Tennessee.
In San Francisco, “there’s just not that much in the construction pipeline, and that’s a really good thing for existing hotels,” Bobby Bowers, senior vice president of operations at Smith Travel Research, said in a telephone interview. “If the demand stays good and the supply’s flat to down, occupancy’s going to go way up.”
Hotel occupancy was 79 percent in San Francisco and nearby San Mateo during the week ended March 10, up from 69 percent a year earlier, according to the hotel data company. That compares with 62 percent across the U.S. The average daily room rate climbed 21 percent to $166.39 in the San Francisco area, more than the 3.6 percent gain to $104.65 nationwide.
The 2013 America’s Cup sailboat race finals are scheduled to be held in San Francisco Bay, providing a boost to tourism. Parc 55, with more than 1,000 rooms, is a luxury hotel located at 55 Cyril Magnin St. near Union Square. Blackstone owns two other hotels in San Francisco, the Sheraton Fisherman’s Wharf and the Hilton San Francisco Union Square, through its Hilton Worldwide unit.
Rockpoint and Highgate Holdings Inc. defaulted on about $211 million of debt on Parc 55 that came due early last month, said the people with knowledge of the transaction. The partners had bought the hotel, then known as the Renaissance Parc 55, for about $220 million in 2006, near the height of the commercial property market, and invested more money to renovate it. The financing for the purchase included a securitized mortgage.
Highgate Remains Manager
Highgate, based in Irving, Texas, will continue to manage the property, and retain a stake of about 2 percent, the people said. Lynne Messina, Highgate’s general counsel, said the firm will keep a “minority” stake in Parc 55. She declined to comment further. The property will remain a Wyndham hotel, according to one of the people with knowledge of the deal.
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