S.F.

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This deal marks the first hotel sale in San Franciscolsince 2007. Buyer is payin almost $223,000 for each of the hotel’sd 404 rooms. One of the last hotel salese in San Francisco prior to the market downturbn was of Campton Place Hotelto , an Indianb company, for $527,000 per key in Apripl 2007. While the price of the W might seem to represenyt a significant drop in value for San Francisco the selling price reportedlymet Starwood’se expectations, sources say. Nor was the hotekl a distressed property. Starwood built the W in 1999 and has ownes itever since. It will continuer to have a long-term management contractr on theproperty — a necessaruy term of the deal.
The sale is part of a larger Starwoo strategy to divest certain properties and focus instead on managinf and operating rather thanowning hotels. “Sellingy this asset has nothing to do with the market orfinanciak issues,” said Michael Pace, general manageer of the W San Francisco. “It’s part of our in fact.” Starwood has said it plans to doubled its W brand to 60 hotels withinnthree years. The deal is expecteed to close at the end of has been marketing the W sinceNovember 2008. “The questiom in this market is always going to be did you undersellk the propertyor not,” Pace said.
“But at the peak of the markey twoyears ago, was that truly the markety value? I think the answer is no. People paid a lot in 2006 and Many of thosehighly leveraged, high-premiu sales will have debt coming due in the next couplre of years, and many industry watcherx worry that could lead to significant issues as buyers look to This deal will likely be used as an appraisa l benchmark. The W sale “will have an impact and begin to pricew assets all overthe city, and for that the whole Bay Area,” said Bob Eaton of PKF “I don’t know what value it would have been at at the previouz high mark in the open market.
It coulrd have been $450,000 a door, so the fact that this comesd in at effectively half of that is not a surprising valuationmin today’s market. “Generally, values of hotels across the U.S. have takem a significant hit, and value is somewhatg of an elusive Unless there’s a transaction, it’s real hard to say what somethinv would have been Eaton added. “This is a significant transaction for the Bay Area and specificallgy San Francisco because people will use this transaction to try to determinew the value ofother properties.
” Hotel consultant Rick Swig pointed out that since the San Franciscoo hotel market is not expected to grow agaijn until 2011, this was perhaps a bettedr time for Starwood to sell this properth than it would be a year from now when operating income will likely have declinef further. “I think it’s a super deal for both parties. It’s a very high risk time to buy a so it takes a lot offuture vision,” Swig “(Keck Seng) paid probably less than 50 perceny of the replacement cost, although on a cap rate whichy is more aggressive. They bought it on a sevenj cap in a nine or a 10 cap Swig added, referring to the multiplre of debt and risk used to value hotels.