KBS Realty Advisors is the latest Orange County real estate investor looking to invest in New Orleans’ hospitality market, even as the Newport Beach-based company continues to seek deals—and investors—in its own backyard.
An affiliate of the privately held company, one of the country’s largest investors in commercial real estate over the past five years, disclosed this month that it entered into a contract to buy the Q&C Hotel, a 196-room property in downtown New Orleans near the city’s French Quarter.
The boutique hotel will trade hands for $51.2 million, or about $261,000 per room, according to regulatory filings.
A time frame for the sale’s completion wasn’t disclosed.
It’s being acquired by KBS Strategic Opportunity REIT II Inc., a nontraded real estate investment trust run by KBS that has raised about $50 million from investors over the past two years.
The property, formerly known as the Queen & Crescent Hotel, was built in 1913 and completely renovated last year, according to Securities and Exchange Commission filings pertaining to the impending acquisition.
The average daily rate at the hotel this year is $143, according to regulatory filings.
It’s the third highest-rated hotel in New Orleans, according to TripAdvisors.com.
A venture between Westport, Conn.-based Northview Hotel Group and Apollo Global Management in New York is selling the property, which it bought in 2013 for an undisclosed price.
Hotel acquisitions are a new investment focus of KBS this year.
The company—which invests in properties through a variety of nontraded REITS, commingled funds, and sovereign wealth funds—has focused its acquisitions largely on high-end office, industrial and apartment properties.
KBS and affiliates own only one other hotel, according to the company’s website: the Springmaid Beach Resort, a 491-room hotel in Myrtle Beach, S.C., that it paid $40 million for this past January.
The same nontraded REIT that’s buying the Q&C Hotel also bought the Springmaid Beach Resort, which will be rebranded a DoubleTree by Hilton in coming months.
There’s been no disclosure of any similar branding changes planned for the New Orleans hotel as a result of the purchase.
A venture partner listed in regulatory filings as EH Q&C LLC will have a 10% ownership interest in the Q&C Hotel and will operate and manage the property for KBS.
The deal adds to a string of hospitality investments in the Big Easy for OC companies in recent years.
An affiliate of Irvine-based Pacific Hospitality Group bought the 220-room AC Hotel New Orleans last month. The hotel is about a quarter mile from the property KBS is poised to acquire.
Terms weren’t disclosed, but industry sources said Pacific Hospitality paid about $60 million for the 220-room hotel, which works out to $273,000 per room.
It’s the first property Pacific Hospitality has acquired outside of California.
Aliso Viejo-based Sunstone Hotel Investors Inc. owns two properties in New Orleans: the 250-room Hilton New Orleans hotel in the French Quarter, which it bought in 2013 for $59.4 million; and the 494-room JW Marriott New Orleans, which it acquired in 2011 for $93.8 million.
The properties were two of Sunstone’s 10 best-performing hotels last quarter in terms of revenue per available room, or RevPar, Chief Operating Officer Marc Hoffman said during the company’s latest earnings call in August.
Convention business in New Orleans has been strong this year and is projected to increase more than 10% next year, adding to factors that are improving the city’s performance, according to Sunstone Chief Executive John Arabia, whose company owns 30 hotels.
Closer to Home
KBS, despite the new interest in hotels, remains an active investor in other property types, not to mention an active fundraiser.
This month, the company filed plans with the SEC to raise up to $2.3 billion for its latest nontraded REIT, whose shares won’t be listed on a stock exchange.
Plans are for money raised from the KBS Growth & Income REIT to go into buying “core real estate properties and real estate-related assets,” which the company defines as “existing properties with at least 80% occupancy.”
KBS Growth & Income REIT, despite just filing the registration statement, already has one property under ownership: the Von Karman Tech Center in Irvine, a two-story building near the intersection of Von Karman Avenue and Alton Parkway.
The property spans 101,161 square feet and is fully leased, the largest tenant being Hosting, a cloud computing and database services company.
KBS Growth & Income REIT bought the office in August for $21.5 million, or about $212 per square foot.
KBS is run by Charles Schreiber, a former Koll Development Co. executive, and Peter Bren, the brother of Irvine Company Chairman Donald Bren.
KBS and its affiliates have bought and sold more than $30 billion worth of real estate over the past 13 years on behalf of pension funds and other institutional investors, as well as private investors that buy shares in its numerous nontraded REITS.
