• Targeted renovations to enhance revenue performance
• Creating new revenue stream, by entering into ground lease with a restaurant group to build and operate a “P.F. Chang’s” restaurant on vacant land
• Managed disposition strategy and process to maximize exit proceeds

SITUATION

The Embassy Suites La Jolla was owned by a joint venture between Hilton Hotels Corporation and an offshore investment group. Hilton was the general partner for the limited partnership, as well as the operator of the hotel. The asset manager’s mandate was to create and execute an asset management plan that maximized disposition proceeds at the end of a short-term hold period.

PLAN

• Created an asset management plan to drive operating performance via a renovated product, and implemented cost containment measures to improve cash flow
• Initiated targeted renovations to capture immediate revenue upside, gain market share and improve overall profitability
• Conceptualized a plan to convert vacant land into a ground lease for a “build and operate” restaurant operation
• Worked with leasing consultants to source restaurant operators; selected P.F. Chang’s as the ground lessee and restaurant operator, negotiated and finalized ground lease agreement that delivered $1.2 million in additional revenue to the hotel
• Timed asset disposition in a favorable capital markets environment
• Selected broker and marketed the asset unencumbered by management

RESULTS

• The asset sold for $100.1 million ($300,000 per key) representing a 6.0% cap rate on TTM cash flow
• The investment delivered a Total Return on Equity of 2.5X