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Santa Monica Hotel on School District Land Sells for $154 Million

 

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October 5, 2018 -- Hilton's DoubleTree Hotel in Santa Monica, which was embroiled in a unionizing battle that shaped its land lease from the School District, has been sold for $154 million, according to media reports.

Westmont Hospitality Group, a Canada-based hotelier, and the New York-based real estate investment firm Square Mile Capital Management purchased the hotel last week, the Los Angeles Business Journal reported Wednesday.

The price tag translates to nearly $608,700 per room, the Journal said.

The deal for the eight-story, 253-room hotel on School District land across from Santa Monica High School closed last Friday, according to CoStar Group Inc.

The building was sold by Merion Realty Partners based in Pennsylvania and Procaccianti Cos based in Rhode Island, CoStar said.

The 206,000-square-foot hotel includes fewer than ten apartments and a separate building with approximately 32,000 square feet of office space, according to a Square Mile representative cited by the Business Journal.

The sale comes 16 months after the previous owners signed a new joint occupancy lease with the School District that was extended from a termination date of 2051 to 2082 with the approval of the State Board of Education.

The lease required the hotel to sign a labor peace agreement with UNITE Here Local 11 that capped a 16-year battle to unionize the hotel.

The peace agreement came three years after hotel workers brought their complaints about worker conditions to the School Board, which was entertaining a lease proposal by the hotel's owner in 2014.

Under the proposal, the lessee would spend at least $10 million to renovate the hotel and upgrade its brand from a Doubletree to a Hilton, according to a June 1, 2017 staff report to the School Board.

The lessee also proposed a modified rent structure that "would allow the district to participate in the gross revenues of the hotel and office building and significantly increase the amount payable to the district," according to District staff.

At the urging of the union, a powerful force in local politics that represents employees at some of Santa Monica's largest hotels, the Board requested the DoubleTree to clarify how certain lease payment calculations were made.

The fight to unionize the hotel continued for another three years before a lease extension was signed in June 2017.

"Over the course of the past two plus years the district’s expert team has negotiated a new amended and restated ground lease for this property," staff wrote in its 2017 staff report recommending the Board sign the lease.

The hotel, staff said in its report, was "prepared to comply with Board Policy 3432, Economic Certainty of Revenue Hospitality Operations on District Property which states:

“The district shall not execute any lease with a hospitality operations lessee unless and until the hospitality operations lessee has signed a Board of Education labor peace agreement."

The lease, staff wrote, would bring "projected financial benefits to the district."

 


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