Luxury Stanford Court Hotel to Be Sold
The Stanford Court Hotel, the last privately held ultra-deluxe hostelry in the city, is in final negotiations for its sale for more than $125 million.
The impending deal was confirmed last week by James A. Nassikas, president and general manager of the Stanford Court and a principal in the New Orleans-based Royal Stanford Hotel Co., which acquired the facility 15 years ago.
It is part of a national trend that is rapidly forcing independently owned luxury hotels into the arms of multinational chains and overseas investment groups.
Nassikas said Stanford Court owners approached Morgan Stanley last April and asked the firm to circulate an offering memorandum for the seven-story, 402-room hotel.
“We were in no financial trouble, but we just wanted to see what interest was out there,” he said.
“We received 63 positive responses from around the world in May,” Nassikas said. “By July, the responses had been pared to 11. There were six by early August and three by late August.” He declined to name the three.
Reasons for Sale
The deal, if completed, will involve the sale of the hotel for about $300,000 a room, the sale of the management company that operates the hotel and acquisition of a new lease for the site, Nassikas said.
A combination of factors prompted the sale.
One is age. Nassikas celebrated his 61st birthday recently, and his partner, Edgar G. Stern Jr., who built the Royal Orleans Hotel in New Orleans, is 66.
Nassikas confirmed that he was feeling “intimations of mortality” and wanted to move on.
Another reason was the highly competitive hotel situation in San Francisco. In the last 16 months, the Portman, Nikko, Ramada Renaissance and Mandarin hotels have opened in San Francisco, all shooting for exactly the same type of clients Nassikas serves.
Additionally, small boutique hotels, developed by William Kimpton, have proliferated in the downtown area, further eroding Stanford Court’s occupancy rate.
Also, the stock market crash last October badly hurt occupancy rates in chic hotels like the Stanford Court, Nassikas said.
“This city’s major industry is money and banking,” he said. “San Francisco was dramatically affected by the crash. From 30,000 to 40,000 brokerage and banking foot soldiers (nationally) lost their jobs.”
Many stayed at the Stanford Court when they were in the city on business, he said.
Occupancy Rate Dropped
The situation was aggravated by the continuing management and money problems plaguing the Bank of America. “The Bank of America was for years the number one bank in the world,” Nassikas said. “Now, it isn’t even 15th.”
As a result, occupancy at the Stanford Court dropped from 78% in 1982 to 68% last year. “We will do less than that in 1988,” he said.
If the hotel lost 10 rooms a night on a 356-day cycle, its revenues would drop by more than $2 million, he indicated.
Finally, there were the prices.
“Hotels are being sold for fantastic sums,” Nassikas said. “It’s crazy, the money is crazy.”
Prices Shooting Up
He cited hotel purchases by the Sultan of Brunei and other offshore groups where prices of up to $600,000 a room have been paid.
“When we built this hotel and paid $40,000 a room, people said we were crazy; that we would never get back our investment,” he said. “Look at things now. Crazy.”
When the hotel sells, Nassikas said he will leave.
He said he will concentrate on running the Deer Valley ski resort in Utah, of which he is a principal, and perhaps do some hands-on consulting, running a facility, not just giving advice.