Pebblebrook Acquires in San Fran - Analyst BlogWednesday, April 18, 2012
Pebblebrook Hotel Trust (PEB) recently announced that it has acquired San Francisco-based Hotel Milano for $30 million. Hotel Milano comprises 108 rooms and post-acquisition will be managed by the Viceroy Hotel Group.
The company intends to invest approximately $8 million to $10 million in renovating and repositioning the hotel. The renovation of the hotel’s guest room and public area will likely commence in the second half of 2012. Pebblebrook plans to rename the property once the renovation is complete.
This acquisition is expected to be beneficial for Pebblebrook as the hotel is favorably located in the South of Market and Convention Center regions, which includes the Moscone Convention Center, Yerba Buena Gardens, major arts organizations and the 1.5 million square foot Westfield San Francisco Shopping Center.
Hotels in San Francisco have delivered the strongest gains in revenue per available room (RevPAR) in the U.S. in 2011 and have been recovering fast following the economic downturn. Moreover, the San Francisco market has high barriers to entry with a compounded annual growth in supply of 0.5% over the past 20 years. The recently acquired hotel exhibits strong growth potential and is expected to capitalize on this fast growing market.
Pebblebrook is a real estate investment trust (REIT) that acquires and invests primarily in upscale, full service hotels located in urban markets in major gateway cities.The acquisition of Hotel Milano brings the total number of properties in the company’s portfolio to 21.
Pebblebrook currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Host Hotels & Resorts Inc (HST), also holds a Zacks #3 Rank.
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