Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/873170
78 • September 2017 • Western Real Estate Business www.REBusinessOnline.com LAX Leads the Way This demand led Umbrella Hotel Group to purchase the 216-room Dou- bleTree by Hilton Hotel LAX - El Se- gundo for a reported $54 million this past August. The seller, a joint venture between Argosy Real Estate Partners and Evolution Hospitality, completed renovations to the property in 2016 that included a complete reconfigu- ration and enhancement of first-floor public areas and guestroom upgrades. The seven-story asset is the only full-service hotel in the Los Angeles submarket of El Segundo. The prop- erty features a junior Olympic-sized outdoor pool, 3,238 square feet of in- door meeting space, 625 square feet of poolside outdoor space, a new fitness center, 24-hour business center, snack shop, printing service and East Grand Bar & Grille restaurant. The DoubleTree is situated on 2.3 acres at 1985 East Grand Ave., less than three miles from Los Angeles International Airport, which guests can access via the hotel's free shuttle. Umbrella Hotel Group was further attracted to the asset due to its loca- tion within the South Bay office sub- market, which is surrounded by more than 33 million square feet of office space near the 105 and 405 freeways. The JV was represented by HFF's Tony Malk and Scott Hall in the trans- action, while the firm's James Fowler assisted the buyer with debt place- ment. "Umbrella Hotel Group is a unique buyer in today's hotel market and demonstrated a strong commitment to closing this transaction from the outset," Malk says. "The process of as- suming the debt and placing the new mezzanine financing created an extra layer of complication to the transac- tion and required a patient buyer with a long-term outlook." Renovating for Success Umbrella Hotel Group should be in good company, as Blackstone recently moved into the Los Angeles Airport hotel space as well. The powerhouse may have developed a reputation for disposing its LA-area office properties as of late, but the firm seems to be bull- ish on the region's hospitality market. That's because Blackstone just picked up a two-hotel portfolio near LAX for a total of $97 million. The New York- based company nabbed the 350-room Fairfield Inn and Suites and the adja- cent 246-room Aloft hotel from Rubi- con Companies in June. The portfolio is called Aloft El Segundo. Both hotels are less than one mile from LAX, near the 105 and 405 free- ways. Operated by Starwood Hotels & Resorts Worldwide, Aloft features a grab-and-go food option, a 24-hour fitness center, Splash pool, meeting space, a lounge, a bar with cocktails and a full food menu and room access via the hotel's app. Operated by Mar- riott International, the Fairfield Inn & Suites features a complimentary breakfast buffet, outdoor pool, fitness center and meeting space. Rubicon initially acquired the 640- room Hacienda Hotel - the 10th larg- est hotel in Los Angeles County — in September 2013 from a private family that had owned the asset for about 40 years. "The Hacienda represents the kind of special situation that Rubicon fo- cuses on, where we can bring both capital and our skill sets to create value for our investors," said Marc Gordon, founder and principal of the Rubicon Companies, at the time of acquisition. "In the future, we will renovate and reposition the hotel to create an even better experience for our guests while delivering attractive returns for our investors." About three years and $30 million later, the Aloft and Fairfield were born and Gordon was able to deliver on his promise. Hyatt Hotels Corporation executed the same strategy on the 580-room Concourse Hotel at Los Angeles Air- port, which it purchased from an af- filiate of Hyatt. The hotel underwent a $75 million renovation earlier this year when it debuted as Hyatt Regen- cy Los Angeles International Airport. "Our hotel is not only helping to transform Century Boulevard, but it is elevating the hotel experience for travelers who want the convenience of staying close to the airport," says Jeff Rostek, the hotel's managing di- rector. "We offer a level of upscale quality and a fine attention to detail with the hotel's design and service. Our reimagined public spaces, guest room design and anticipatory service will remind guests why it's good not to be home." The new Hyatt is situated one block from the airport. It offers more than 50,000 square feet of meeting space, including one of the largest ballrooms in the LAX market at 14,000 square feet, as well as the only outdoor event lawns in the area. Choice Hotels International is also hoping to hit it big with LAX-essential real estate as it debuted the Cambria Hotels chain near the airport this past May. The 152-room Cambria Hotel Los Angeles — LAX features free WiFi, a fitness center, outdoor pool, laundry services, a bistro and full-service bar and a complimentary airport shuttle. Choice Hotels even features Cam- bria's prime location in its marketing materials where guests looking to book a room online are met with the slogan "Come because we're close to the airport. Stay because we're near the beach." The hotel's location at 199 North Continental Blvd. means guests are also close to Manhattan Beach, sev- eral area malls and Downtown Los Angeles, which is just 20 miles away. Business travelers also enjoy a prime location not just near the airport, but close to notable area employers like DirecTV, Mattel, Northrop Grumman, Raytheon and the Aerospace Corpora- tion. "With the opening of the Cambria Hotel Los Angeles - LAX, the brand now reaches coast-to-coast in the United States' top markets," says Ja- nis Cannon, senior vice president of Upscale Brands for Choice Hotels In- ternational. "Soon our presence will expand tremendously on the West Coast, with a particular focus in the LA area. This Los Angeles-LAX prop- erty offers convenience to local busi- nesses and attractions, an aesthetic matching the stylish landscape of the city, and indulgences that allow guests to treat themselves on the road. This hotel is designed for the needs of today's modern traveler." This latest LAX-area hotel ushers in the Cambria brand's expansion with- in California. It was the first of several area properties to open within the up- scale hotel brand. The chain is also set to open in Anaheim, Glendale, Cala- basas, and at LA Live and on Spring Street in Downtown Los Angeles. The brand also has agreements to develop future hotel properties in Napa and Sonoma. The activity occurring around LAX is reminiscent of an overall healthy Southern California hospitality mar- ket, according to Atlas Hospitality Group's Mid-Year 2017 California Ho- tel Development Survey. The survey notes that 10 new hotels totaling 2,527 rooms have opened in Los Angeles County in the first half of 2017. The county is, in fact, leading California in the number of hotels (204) and to- tal reported rooms (30,306) within the planning stages. The survey attributes this healthy market to a few factors. "A combination of record sales pric- es for existing hotels and the availabil- ity of favorable construction financing are fueling the rapid growth of new hotel rooms throughout California," the study goes on to note. "As the economy continues to stay healthy, it is likely that the state can absorb the increased supply of new inventory without putting downward pressure on RevPAR." LAX has undergone renovations of its own, which has undoubtedly pro- vided inspiration to its surrounding hoteliers. These renovations include the $1.9 billion Thomas Bradley Ter- minal, the $175 million construction of Taxilane S, the $238 million reno- vation of Terminal 6, the $229 mil- lion renovation of Terminal 5, and the $613 million baggage handling and screening system modernization oc- curring across all nine terminals — all of which have occurred in the past five years. Upcoming projects include the $4 billion airport transportation project that will transfer passengers from airport terminals to a new rental car center and the new Los Angeles Metro Crenshaw Line, as well as the new five-level Midfield Satellite Con- course, which will add 11 gates to LAX and accommodate large aircrafts like the Airbus A380 and the Boeing 787 Dreamliner. If past activity is any indicator of future success, the area surrounding LAX should be primed for travelers and investors of all kinds for years to come. n Umbrella Hotel Group purchased the 216-room DoubleTree by Hilton Hotel LAX - El Segundo for a reported $54 million this past August. HOTEL ACTIVITY NEAR LAX TAKES FLIGHT Blackstone picked up a two-hotel portfolio near LAX for a total of $97 million in June that included the 350-room Fairfield Inn and Suites and the adjacent 246-room Aloft. HOTELS from page 1