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Boosting DC's image
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Discussion Starter · #1 ·
Churning Cycle of Sales and Renovations

By Thomas Heath
Washington Post Staff Writer
Monday, June 11, 2007; D01

Magic Johnson and a group of Los Angeles investors just bought the landmark Hilton Washington, north of Dupont Circle, for $290 million and plan to spend $100 million more on renovations. Down Connecticut Avenue, the classic Renaissance Mayflower was sold three months ago for more than $250 million to a private investment company. A few blocks away, two luxury boutique hotels -- the 84-year-old Jefferson Hotel and the 81-year-old St. Regis -- are both closed for year-long makeovers.

The Washington hotel scene is hopping. Classic properties are being upgraded and investors are buying, selling and cashing out for millions. The action is turning what was a semi-sleepy niche into a robust market increasingly aimed at the diplomatic and high-end business traveler.

"You're really seeing a convergence of events," said Thomas J. Baltimore Jr., who runs Robert L. Johnson's RLJ Development investment group. "The lodging climate is still very attractive."

What has been fueling the activity, hospitality experts say, is cheap money. As long as it lasts, owners can borrow to upgrade their properties, and investors can borrow to buy hotels and sell at a profit within a few years or even months. Another factor has been a widespread shortage of hotel rooms in recent years, pushing up nightly rates not just in Washington but also in other "gateway" cities such as New York, San Francisco and Chicago.

How well these investments pay off in the long run depends on whether the trends hold.

"We think there is unmet demand for luxury hotel product such as the St. Regis," said Douglas Greene, a managing member of Haberhill, a Potomac investment firm that is a partner in the St. Regis. "Do we think there is endless demand and upside for the rest of the market? The answer is no."

For now, hotels are refurbishing everything from the carpets on their floors to the pipes in their walls. The Jefferson will uncover its lobby skylight for the first time in decades, allowing the original, barrel-vaulted ceiling to reflect natural light into the entry and registration areas. The St. Regis makeover, which owners hope will preserve its clubby, high-ceilinged corner bar, includes buying an adjacent townhouse to contain a slick new fitness center. Hotels whose history was a key part of their charm are getting modern upgrades -- heating systems that can vary the temperature from room to room, central air, Internet hookups, snazzy bathrooms. And prices are going up: When it reopens this fall, the St. Regis will charge $650 for a standard room, up $100 from its pre-renovation price.

Meanwhile, some hotel owners, including private-equity funds, are taking the current bull market as an opportunity to cash out. Two years ago, Thayer Lodging Group, a private-equity fund headed by Frederic V. Malek, sold its 1,300-room Marriott Wardman Park Hotel at Connecticut Avenue and Woodley Road NW to JBG Cos. for $302 million, up from the $210 million the company had paid six years earlier. JBG is investing in the hotel and adding residences.

"We made two and a half times our equity," Malek said. "It's been a very frothy market if you are a seller." He added that JBG could expect to do well in this market.

The Hotel Washington, whose rooftop restaurant overlooks the White House grounds, was sold twice last year. In the spring, it was bought by Westbrook Partners, an investment group, for about $120 million from the Texas family that had owned it for decades. Barely six months later, with hotel prices soaring, Westbrook flipped the property, selling it to the royal family of Dubai, United Arab Emirates, for $150 million.

Others are bullish and buying. Connecticut-based Rockwood Capital paid $250 million in March for the 660-room Mayflower. The Mayflower's seller, a venture capital group made up of Walton Street Capital, Rockpoint Group and SCS Advisors, had purchased the hotel in 2005.

The new owners are planning further remodeling on top of the $11 million that was done to the Mayflower's meeting rooms prior to Rockwood's purchase.

"Business in the city is very strong," said Laura Schofield, general manager of the St. Regis -- which, like the Jefferson and Hay-Adams, is on 16th Street, not far from the White House. All three were built by developer Harry Wardman nearly a century ago.

The Hay-Adams on Lafayette Square was bought last year by B.F. Saul, the private investment firm of billionaire Frank Saul, for a reported $100 million. The hotel, which was refurbished in 2002, is waiting for permit approval by a historical board to make its rooftop terrace, overlooking the White House, a permanent feature.

"Everybody will be fighting for a piece of the luxury market," said Franck Arnold, managing director of the Jefferson, which was bought in June 2005 by DC CAP Hotelier, a New York real estate firm. "That means you have to bring these old structural and mechanical elements, and adjust them to meet the current and future needs of luxury travelers. We are going to spend a lot of money to do this, but we are going to reproduce the elegance and respect of Thomas Jefferson's spirit. "

Arnold said that when the hotel reopens in fall 2008, he expects a standard room will start at $400, up $100 from pre-renovation rates.

Brickman Associates, which bought the St. Regis in August 2005, will downsize the hotel from 193 rooms to 183 by the time it reopens this fall, but it is increasing the number of suites from 14 to 33, to be priced between $3,000 and $10,000 per night.

"We are correcting something we always wanted to correct," Schofield said.

At the other end of the market is the Hilton Washington, perched on 5.25 acres north of Dupont Circle and best known as the place where John Hinckley shot President Reagan in March 1981. On Thursday, basketball star Earvin "Magic" Johnson and his Los Angeles partners had breakfast under a tent in the hotel's garden, joined later by D.C. Mayor Adrian M. Fenty to celebrate the hotel's sale and upcoming renovation.

Bobby Turner, managing partner of the Canyon-Johnson Urban Fund, which purchased the hotel, said they were adding a smaller, "junior ballroom" to the hotel's 38,000-square-foot main ballroom, which has been its signature attraction since opening in 1965.

"We haven't been able to accommodate the smaller groups," Turner said, adding that the hotel's main competitor in the group market -- which represents 60 percent of the Hilton's clientele -- is the Marriott Wardman in Woodley Park. The Hilton will remain open during the two-year renovation, scheduled to begin next January.

"You won't recognize it when we reopen," Turner said.

He told the hotel's 300 workers that the new owners were "buying a dream team of experience" by keeping the Hilton name and management. "We are going to inject new energy and new capital so this hotel is nothing short of magical."

Staff writer Michael S. Rosenwald contributed to this report.

Boosting DC's image
192 Posts
Discussion Starter · #3 ·
lol. I know.

And, don't think for a second that those Washington Post writers are not in competition with each other that cover the various jurisdictions throughout our region. You can tell by the quotes that they choose to include in their articles. You can also tell by the information that they selectively leave out of their articles.
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