Sheraton Universal gets new owner
The landmark Sheraton Universal Hotel in Universal City has been sold for $122 million in a deal that illustrates investors’ continuing appetite for prime hotel properties in a rebounding travel market.
Lowe Enterprises, a Brentwood-based real estate investment and development firm, said this week that it planned to upgrade the tower, which overlooks the Hollywood Freeway. Lowe will keep Sheraton Hotels & Resorts as the property’s manager.
Lowe bought the 20-story building from affiliates of Walton Street Capital and SCS Advisors Inc., which paid less than $50 million for it in 2003. The run-up in value reflects the rising fortunes of the hotel industry, which has seen occupancy and room rates rise steadily for the last two years.
“We’ve been looking for a solid opportunity to take advantage of the strong Los Angeles hotel market,” said Bob Lowe, chairman of Lowe Enterprises.
The run-up in value also could reflect the hotel’s strong competitive position.
The Sheraton and the nearby Hilton Los Angeles/Universal City are the hotels of choice for many travelers with business at nearby studios, as well as for tourists visiting Universal CityWalk and other entertainment attractions.
“It’s one of the top performers in Los Angeles County,” said industry consultant Alan Reay of Atlas Hospitality.
The hotel also stands to prosper from a proposed $3-billion addition to Universal Studios that would add office buildings, residences and studio facilities.
The Sheraton Universal is considered a four-star “deluxe full-service” hotel, Reay said. Sheraton is a venerated brand of Starwood Hotels & Resorts Worldwide, a step below its luxury St. Regis line.
Lowe Enterprises’ strategy calls for a $20-million renovation of all guest rooms and public spaces, including a new coffee shop and expanded bar area in the lobby. The number of rooms will grow from 436 to 451 after some underused meeting space is converted to guest quarters, said Bleeker Seaman, a Lowe managing director.
The makeover should begin in April and be completed by 2008, Seaman said, adding, “We want to make sure it appeals to both corporate and leisure travelers.”
The hotel was built in 1969 and expanded in 1978.
Hotel investment is sweeping the country, according to a report released Monday by brokerage firm Jones Lang LaSalle Hotels.
“Many investors who bought U.S. hotel assets during 2005 saw their equity double in the following 12 months -- attracting more investors to hotel real estate,” the report said, making 2006 the third consecutive year of record property sales.
The trend of big hotel deals should continue through 2008, the report said, with foreign and high-net-worth investors joining institutional, pension fund, private equity and real estate investment trust players in the market.
With demand for hotel rooms growing among business and leisure travelers, owners have raised prices. Average room rates in California jumped 8.5% last year over 2005, Reay said. At full-service hotels like the Sheraton Universal, however, average room prices were up as much as 17%.
“There is practically no new supply” of full-service hotels, Reay said, “so they are able to really increase rates.”
High construction costs and the dearth of suitable sites for new hotels are limiting the creation of new properties. Lowe Enterprises is one of the few developers with a major project close to breaking ground, the $440-million Terranea Resort on the coast of Rancho Palos Verdes.
Demand for hotel rooms will continue to grow with the economy, said Carl Winston, director of the hospitality and tourism management program at San Diego State University. That means the deep price discounts that travelers took advantage of early in the decade are not coming back any time soon.
“Consumers may have been feasting five to seven years ago, but now it’s famine time,” Winston said. “It’s the consumers’ time to pay up if they want a hotel room.”
