Posh Sheraton Premiere Hotel for Sale; Cigna Is Likely to Acquire It
The fanciest hotel in the San Fernando Valley, suffering from lower-than-expected occupancy, is up for sale.
MCA and Sheraton confirmed Thursday that they are negotiating to sell their 2-year old Sheraton Premiere Hotel in Universal City. Proposed terms were not revealed, but both sides in the talks said an agreement is likely within a month to sell the building to Cigna, a Philadelphia-based insurance company with extensive real estate holdings.
Larry Spungin, vice president of MCA’s real estate arm, would not say if the 24-story luxury hotel is losing money but acknowledged that it has not performed to expectation. He said MCA will keep the 6.5-acre parcel on which the hotel rests.
Spungin said the adjacent Sheraton Universal, owned by MCA but rented to Sheraton, is not for sale.
The glittery Sheraton Premiere at 555 Universal Terrace Parkway, built for $74 million and designed by William L. Pereira Associates of Los Angeles, has 455 rooms and a ballroom seating 1,400. It is the most luxurious hotel in the Valley and among the most luxurious in Los Angeles, according to Mitchell Roberts, a Los Angeles-based hotel specialist.
“You’d probably be safe to say the deal is somewhere between $80 million and $100 million,” said Ted Henderek, executive vice president at Stephen W. Brener Associates, a New York hotel consulting firm. But, he said, the price will depend on a host of factors, including the terms of the ground lease.
Spungin would not disclose the hotel’s vacancy rate, but Roberts said the Sheraton Premiere suffered because of an industrywide oversupply of rooms, its high rates and its location in the Valley.
Rooms start at $125 a person and run up to $2,500 for the best suite. Despite the Premiere’s dramatic views and proximity to the Hollywood Freeway, many potential customers from the entertainment industry still prefer the Westside, Roberts said.
‘Strawberry Fields’
“It’s the old L.A. perception that the Valley is still strawberry fields,” he said.
A profitable entertainment company, MCA also owns 420 acres in Universal City, and an industry analyst said the value of that acreage is enhanced by the hotel, even if MCA does not own it.
“They’re not in the hotel-operating business,” said the analyst, Mark Manson of Donaldson Lufkin & Jenrette brokerage in New York. “MCA’s major corporate purpose will have been achieved by having the hotel there already.”
The building is expected to remain a hotel, and Sheraton may continue to run it after the sale, although a Sheraton spokeswoman said her firm would have to compete with other hotel operators for the job.
For Sheraton, a unit of ITT, the potential sale is part of a drive to sell hotels and emphasize hotel management. There are 493 Sheratons worldwide; the firm owns all or part of 42 of them. Sheraton is the nation’s second-largest hostelry chain after Holiday Corp., which operates Holiday Inns.
