LOS ANGELES--(BUSINESS WIRE)--On July 31, UNITE HERE wrote to hotel buyers asking if five bars, two restaurants, and $30 million in renovations will push Hotel Figueroa’s asking price past what buyers should pay. Over three months later, Figueroa owner GreenOak Real Estate has been unable to find a buyer.
Industry indicators should make buyers wary of overpaying for the Hotel Figueroa as the hotel market may be peaking. STR reported that in Q3 2017, national ADR growth was the worst since Q4 2010, and RevPAR grew at its lowest rate since Q1 2010.
According to analysis by Jack Corgel, Ph. D., Managing Director of CBRE Hotels’ Americas Research and Professor of Real Estate at the Cornell University School of Hotel Administration, a typical Los Angeles hotel in Q4 2016 was valued over 40% greater than at the previous market peak, compared to a national average of 14.6%.
The Los Angeles/Long Beach hotel market has seen an increase in supply, with many hotels still in the development pipeline. As of August 2017, Deutsche Bank and STR reported 4,066 hotel rooms were opened in the Los Angeles/Long Beach market since December 31, 2014, or 4% of the market’s 101,974-room supply. Furthermore, as of August 2017, 14,970 rooms were in the active pipeline (hotels in construction, final planning and planning), or 14.7% of the market’s supply. The Hotel Figueroa will compete with some of these recently-opened hotels, as well as additional properties as they come online.
GreenOak co-founder Sonny Kalsi told an investor in March 2017 that “it would be hard for me to imagine that whoever owns that hotel wouldn’t be running it as a union hotel.” UNITE HERE Local 11 expects that the buyer of the hotel will sign a card-check neutrality agreement similar to the agreements followed at the recently-opened Hotel Indigo and Intercontinental Los Angeles, where Local 11 was recognized as the representative of hotel workers. Labor disputes at other Los Angeles hotels have included boycotts, strikes, pickets and communication with the public and investors in hotel properties.