A British hotel operator has purchased a historic building in downtown Los Angeles for $30 million and plans to transform the decaying structure into a hip, stylish hotel, according to JLL, the brokerage involved in the deal.
The investment is the latest bet that the neighborhood's renaissance has created a place where tourists, not just business travelers eyeing a comfortable environment, want to lay down their heads. And with the money coming from overseas, it's a sign investors worldwide think so too.
"Downtown is thriving and international companies are all taking note," said Sara Lo, a senior manager specializing in the hospitality business at consulting and accounting firm Ernst & Young.
JLL said that Hoxton is now "underway on plans for the hotel," but did not provide further details. The operator has hotels in London and Amsterdam and plans to open another in New York and one in Paris next year, according to its website.
A representative from Hoxton owner Ennismore of London declined to comment.
Hoxton describes its brand as the "anti-hotel," where travelers find not only a bed, but "a place where people could eat, drink, work and play anytime of day." This year, British newspaper the Independent called Hoxton's Amsterdam outpost "an almost painfully trendy hotel in the Netherlands' hippest city."
The entry of a niche foreign hotel firm into downtown Los Angeles marks a stark reversal from decades past. The area's hotel market has long been dominated by corporate giants catering to business travelers, said Alan Reay of Atlas Hospitality Group. Tourists instead flocked to West Hollywood or beach communities such as Santa Monica and Marina del Rey.
But that's changing. A city center once derided as a ghost town after 5 is now home to a bustling restaurant and bar scene. Developers are increasingly looking to create smaller "lifestyle" boutique hotels — ones with uniquely designed rooms and high-end food and nightlife offerings.
A Hoxton hotel at 11th Street and Broadway would join several others nearby.
Just across the street, the 148-room Downtown L.A. Proper Hotel is planned in a vacant building constructed in the 1920s as the home of the Commercial Club of Southern California, a business booster group. Two blocks away is the popular Ace Hotel, a boutique that opened last year in the historic United Artists building and is credited with drawing more investment to the area.
Even big chains are getting into the mix.
A Hotel Indigo, a hip brand operated by InterContinental Hotels Group, is under construction as part of a Chinese company's $1-billion Metropolis development near Staples Center.
The downtown market is strong — with a 77% occupancy rate that outperforms the 75% average for the nation's top 25 markets, Lo said. From January through September, the average daily room rate downtown was $202, 6.7% higher than during the same period in 2014. In all, 4,000 hotel rooms are under construction or planned downtown, with a quarter of those boutique projects, Lo said.
"It seems like a week does not go by without a new hotel planned for downtown L.A.," said Reay, who estimated that the Hoxton hotel could fetch $250 to $300 a night.
Reay said he doesn't believe there's an "immediate threat" of overbuilding, but "that is always in the back of everyone's minds."
Ernest Wooden Jr., president of the Los Angeles Tourism & Convention Board, brushed off any concerns about overbuilding, saying occupancy rates have continued to rise in recent years even as more hotels have opened.
"The projects currently underway are critical to our long-term ability to attract both leisure and business travelers," he said in a statement.
Part of the reason for the optimism is an increasingly vibrant downtown, especially near 11th and Broadway — an area that until recently saw fewer investments than other parts of the urban core.
Now, several residential complexes are underway, including roughly 650 apartment units from luxury developer Geoffrey Palmer. New York developer Georgetown Co. announced in September a $40-million project to redevelop the historic Herald Examiner building into creative offices and ground-level restaurants.
"This is going to be the next corner — with everything that is happening here — the hottest corner in downtown L.A.," said Mike Condon Jr., a real estate broker with JLL who represented a group of private investors that sold 1060 S. Broadway to the British firm.
Designed in the Renaissance Revival style, the 1920s building set to become a Hoxton once housed the headquarters of what is today the L.A. County Metropolitan Transportation Authority.
But the 10-story building, like Broadway itself, fell on hard times. Condon said the upper-level offices have been empty since the mid- to late-1990s.
Graffiti lines the walls of the upper floors; paint is chipping; ceilings are crumbling. But amid downtown's revival, there are signs of change.
Several street-level shops, including a Salvadoran restaurant, have recently left in preparation for the upcoming redevelopment, Condon said.
Although Hoxton's owners declined to comment, a peek into the building's future could lie in previous plans.
Condon said the former owners, investors who formed a shell company, mulled several options, including a design for a roughly 150-bed hotel, a rooftop lounge and pool and a basement bar or night club. They closed the sale to the British hotel company Dec. 24, he said.
Downtown Los Angeles development consultant Hal Bastian said the decision to sell to an overseas buyer was telling.
"It shows that the international market has gotten the memo that DTLA is the most undervalued major city on planet Earth," he said.