Portland-Area Lodge Purchase Brings Pebblebrook’s Five-Month Buying Binge to $425M
- Nov 05, 2010
November 5, 2010
By Barbra Murray, Contributing Editor
Pebblebrook Hotel Trust, which has averaged approximately one acquisition a month since its first purchase in June, has bought the upper-upscale Skamania Lodge in Stevenson, Wash., from Lowe Enterprises Investors in a $55.8 million, all-cash deal. The transaction leaves the year-old REIT with a portfolio of six properties acquired for an aggregate $425 million in cash on hand.
Located along the Columbia River near Mount St. Helens, the 17-year-old Skamania Lodge occupies 175 acres just 45 miles east of Portland, Oregon. Jon Bortz, chairman and CEO of Pebblebrook, noted that the lodge’s close proximity to Portland makes Skamania a popular destination for both the leisure and corporate markets, adding that the property has historically performed well and the firm’s ability to acquire it at such a deep discount to replacement cost is a good opportunity. National lodging operator Destination Hotels & Resorts, a subsidiary of Lowe Enterprises, will stay on as the property’s manager, a role it has held for the last five years.
In addition to 254 luxury guestrooms, the conference resort, which was expanded in 2002 and upgraded to the tune of $4.5 million over the last three years, encompasses 22,000 square feet of certified meeting space and 44,000 square feet of outdoor event space, as well as three restaurants, a business center and a spa and fitness facility. The property is also home to an 18-hole golf course and trails for hiking and biking.
At 48 percent, Skamania Lodge’s average vacancy rate in 2009 bore the scars of the economic downturn. However, there is good news for Skamania and other lodging facilities in the country–the hotel market is unquestionably on the rebound. “The increase in room demand recorded over the first half of 2010 was considerable,” according to a third quarter report by Marcus & Millichap Real Estate Investment Services, “driving improvements in occupancy and revenue per available room.”
In general, prospects for success over the long, long term are positive given that there is little likelihood of an increase in local competition. Not only do stringent zoning laws prohibit new development in the area, the property’s location within the protected Columbia River Gorge, a national scenic area, means that the hopes of a real estate company considering building a new resort or conference center nearby would likely be dashed.
Pebblebrook’s acquisition of Skamania comes late in the year, but the year isn’t over yet and with a few deals in the works, the REIT may very well add more assets to its portfolio before 2010 comes to a close. In October, the company entered into an agreement to snap up a hotel in the Los Angeles area for $102.8 million and another in metropolitan Philadelphia for $89 million. Should those transactions close before the ringing in of 2011, Pebblebrook will have plunked down well over a half-billion dollars for hotel purchases in just six months.
But Pebblebrook is not the only young REIT scouring the upper-upscale hospitality market for potential purchases. Chesapeake Lodging Trust, which completed its IPO in January 2010, has been quite acquisitive this year. The REIT kicked off its shopping spree in March by grabbing the 498-room Hyatt Regency Boston for approximately $113 million in cash.