Luxury Hotel SLS Beverly Hills on the Market

Sam Nazarian, the Los Angeles restaurant and nightclub owner, is putting his SLS Beverly Hills luxury hotel on the market as part of a strategy to cash in on the company’s real estate investments and focus on its management operations.

The Southern California property may fetch more than $700,000 for each of its 297 rooms, according to Nazarian, founder and chief executive officer of SBE Entertainment Group LLC, SLS’s parent company. SBE and its partner, Los Angeles-based CIM Group, also are in talks with three potential buyers for the 140-room SLS Hotel South Beach in Miami Beach, Florida, Nazarian said.

“We are confident the SLS Beverly Hills will sell for more than $210 million if you look at how the property is performing, the possibility to add on development to the existing hotel and the revitalization of that neighborhood,” Nazarian said in a telephone interview.

SBE is seeking to profit on investments made when the company was starting to establish the luxury-hotel chain in the early 2000s. With five hotel properties open and demand for high-end lodging at the highest since the 2007 peak, Nazarian said the time is right to sell the real estate while expanding the company’s management contracts.

“Our strategy is to move to the asset-light model,” he said. “The market is very hot right now. L.A. is trailing some of the bigger cities like New York and Miami, but it is recovering nicely. And Miami is as hot as it can be.”

Highest Occupancies

Miami had an 84.6 percent hotel-occupancy rate this year through March, the highest among the top 25 U.S. markets after Oahu, Hawaii, according to Hendersonville, Tennessee-based research firm STR Inc. Los Angeles ranked fourth, at 77.2 percent.

The SLS Beverly Hills has a yearly average occupancy rate of about 80 percent, Nazarian said.

A deal for the SLS South Beach could be completed by the end of July, said Nazarian, who expects the property to sell for about $900,000 a room, or $126 million.

Last month, SBE and developer David Edelstein sold Miami Beach’s Raleigh Hotel to fashion designer Tommy Hilfiger for $68.5 million.

In New York, Nazarian is planning a December opening for a hotel project on Park Avenue South and 30th Street. SBE, which will manage the hotel, and partner Moin Development Corp. are gutting and adding on to an existing office building at the site. Nazarian also said he would like to have SLS properties in uptown Manhattan and the Soho neighborhood.

Brief Opportunity

SBE, which also owns Hyde nightclubs and the Katsuya and Cleo restaurant brands, has said it wants to build SLS into a chain of boutique hotels that would attract high-end leisure and business travelers. The company may need to act swiftly, said Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia.

“Right now, money is available for sales and for development because the hotel fundamentals have improved so much,” Bhalla said in a telephone interview. “In the luxury sector, you have to pull the trigger quickly, especially when you have a small boutique brand. You generally have only a small window of opportunity as sales, financing and new development opportunities can dry up very quickly.”

Current and planned projects include an SLS in Philadelphia and mixed-use properties in Florida that will include lodging and condominiums, including the SLS Brickell in Miami. SBE is scheduled to open the revamped former Sahara Hotel in Las Vegas as an SLS at the end of August and will add a property in Seattle as part of an office-and-hotel tower scheduled to open in the third quarter of 2016, according to Nazarian.

“Our strategy is to come in with equity as a proof of confidence,” he said. “Then it’s a good time to sell when the market is hot and cash in on some of those investments we made.”

The listing of the SLS Beverly Hills was reported on May 7 by Real Estate Alert, a trade newsletter.