Spiegel: Volatile Insurance Pricing Touching New Development October 30, 2012 La Eace: San Francisco

The properties are the latest to change hands in the city in the vicinity of Union Square. Earlier this month , Maryland-based Pebblebrook central california travel Hotel Trust said it had bought the Hotel Palomar at 4th and Market streets just south of the famed shopping district. The company said it paid $58 million, or not quite $300,000 a room. In April it bought the neighboring Hotel Milano, paying $275,000 a room.
"We sold the property for two reasons. One, there appears to be a great deal of investment capital looking to buy hotels. The property also needs some work, and we would prefer that the new buyer completed this work instead of us," said Mike House, founder of House Properties.
The sellers owned the property since 2005, paying $16.8 million. The hotel had an average annual occupancy rate of 83 percent and an average daily room rate of $175. Revenue per available room at the hotel was up by 15 percent versus the same time last year.
"The property is one-and-a-half blocks from Union Square. This means it is close enough to the square, but is far enough away so it is quiet," House said. The hotel attracts both leisure and business travelers including those drawn by its small amount of meeting space. To enhance value, the new owners could open a new restaurant, House said. Joie De Vivre expects to remain as the hotel manager.
According to its Web site, DiamondRock only owns one other hotel in the San Francisco Bay Area, the 182-room Lodge at Sonoma Renaissance Resort Spa in Sonoma. The publicly traded real estate investment trust owns 26 hotels nationwide with 11,500 rooms.
Larkspur Hotels in Larkspur and San Francisco-based Farallon Capital were the sellers of the Larkspur Hotel Union Square. The new owners are a group of Canadian investors represented in the transaction by The Ehmer Group, a hospitality investment services company based in San Francisco.
"There were several reasons for the price per room being lower than some of the other hotel assets that have traded hands recently near Union Square," said Richard Ehmer, president of The Ehmer Group. "One is that the Canadian group has a higher cost of capital than does a public central california travel REIT. This doesn't allow them to pay as much for properties. There also was the fact that the Larkspur Hotel has unionized employees, which affects the overall cash flow of the property."
The Canadian group expects to return the hotel's name to its original: The Cartwright Hotel. The investment company is based in Vancouver, Canada. "The company owns hotels and apartments in Canada and in Seattle central california travel and was very much interested in finding a property to buy in San Francisco," Ehmer said.
Tagged DiamondRock Hospitality , Eastdil Secured , Farallon Capital , House Properties , Joie De Vivre , Larkspur , Larkspur Hotels , Mill Valley , Pebblebrook Hotel Trust , REIT , San Francisco , Skyline Pacific Properties , Sonoma , The Ehmer Group
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