The former Red Lion Hotel in downtown Seattle sold Thursday for $130.7 million, or nearly $410,000 a room, the highest price ever paid in the metro area, according to hotel experts.
But the record price for the 319-room hotel, now known as Motif Seattle, could quickly be surpassed by the pending sale of the 120-room Hotel 1000: Two groups are buying it for $63 million or about $525,000 a room, according to a report in The Wall Street Journal, which didn’t identify its sources.
“It is the highest price paid (per key) ever for a hotel in Washington state,” said Chris Burdett, senior vice president of CBRE Hotels in Seattle, which was not involved in the transaction.
The record-price deals for downtown Seattle hotels are the latest good news for a surging hotel market that’s kicked off a wave of new construction.
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Downtown Seattle has about 12,000 hotel rooms; the construction of R.C. Hedreen’s mega-convention hotel and smaller hotels could add another 3,000 rooms to the inventory.
Experts say they’d expect more record deals for two reasons.
For the first time in at least 25 years, downtown-occupancy rates are expected to exceed 80 percent, which effectively means hotels are at full capacity. That means room rates will rise rapidly over the next two years until new hotels open, Burdett said.
Second, “there’s lot of money chasing very few deals,” he said.
Real-estate investment trusts and private-equity funds must invest billions of dollars in capital for institutional investors, Burdett said. Seattle’s commercial real-estate market is viewed as one of the most attractive in the nation, after New York, San Francisco and Boston, because of the area’s job growth.
Connecticut-based Cornerstone Real Estate Advisers bought Motif Seattle from Los Angeles-based Lowe Enterprises, public records show.
Motif Seattle aims to offer a boutique luxury hotel with the capacity of a convention hotel; among Seattle hotels, it ranks third behind the Westin and Sheraton for the single largest meeting space.
Lowe Enterprises bought the Red Lion Hotel at 1415 Fifth Ave. in 2011 for $71 million and set in motion a top-to-bottom $25 million renovation. Earlier this month, the hotel changed its name to Motif Seattle.
Destination Hotels & Resorts, a Lowe subsidiary, managed the Red Lion and will continue to operate the new hotel; it also manages The Woodmark in Kirkland and Suncadia in Cle Elum, Kittitas County.
Hotel 1000 is being sold to Thayer Lodging Group, a subsidiary of Canadian investment giant Brookfield Asset Management, and Portland-based Provenance Hotels. Crowned with 10 floors of condominiums, the 14-story hotel at 1000 First Ave., developed by Murray Franklyn, opened in summer 2006.
Provenance owns 13 hotels, including Hotel Max in Seattle and Hotel Murano in Tacoma. The company got its start in 1985 when it bought The Roosevelt Hotel.
Bashar Wali, Provenance’s president, said his company would assume management of Hotel 1000 on July 1, once the deal closes. He would not confirm the transaction’s price, citing a confidentiality agreement.
The Hotel 1000 is Thayer’s first deal since being acquired by Brookfield, Wali said.
“Thayer must deploy many, many millions in the hospitality industry,” he said. “This is our first deal, with the idea of doing many, many more deals together.”
The reason investors are willing to pay record prices today, Wali said, is that the cost to acquire land and construct new hotels in Seattle’s core is exorbitant. And there’s an expectation that investors and lenders won’t back projects that aren’t feasible.
“What we don’t need are stupid projects done with stupid money,” he said. “Hopefully maintaining supply in check will make the next landing at the end of the economic cycle a little softer than last time.”
Sanjay Bhatt: 206-464-3103 or firstname.lastname@example.org