Rooms at the swanky Hotel Palomar in Dupont Circle will be getting a facelift next year, as new owner LaSalle Hotel Properties puts its stamp on the 335-room property, according to chief executive Michael D. Barnello.
The Bethesda-based real estate investment trust announced Friday its purchase of the hotel, located at 2121 P St. NW, from Kimpton Hotel & Restaurant Group, for $143.8 million. LaSalle tapped its unsecured credit facility and used $46.6 million in proceeds from selling shares to fund the deal.
“This hotel has a great location; it’s in Dupont Circle, we’re right near the embassies — a lot of demand generators,” Barnello said. “We got a great price, a great price per room and on a cap rate basis.”
Kimpton will continue to manage the property, making it the 10th hotel the company runs for LaSalle. The seller poured $38 million into renovating the 50-year-old hotel in 2006.
Hotel Palomar is known for its modish style, with red accent built-ins, marble floors and sleek mahogany-trimmed furniture. Barnello has no plans to touch the chic lobby, but said the hotel “is in need of a rooms redo.”
“The hotel is in great condition, and does really well,” he said. But “the renovation, when it’s done, will provide additional upside.”
The Dupont Circle property marks LaSalle’s ninth hotel in the District, where it also owns Hotel Madera and the Topaz Hotel.
“We love D.C.,” Barnello said. “Demand is at peak levels in the [central business district]. There is no supply basically growth this year and next year. It’s a strong market because it has a lot of demand generators: the federal government ... citywide business, corporate business, leisure travel.”
Analyst Daniel Donlan of Janney Capital Markets said, in a research note, that with LaSalle’s collection of D.C. assets, “there are inherent cost synergies the REIT can realize.” The acquisition, he continued, “fits nicely with the REIT’s core strategy of owning high quality, well-located hotels in the top eight markets.”
LaSalle has taken a measured approach to tucking hotels into its portfolio. The REIT, which owns 38 properties, picked up six assets in 2010 and three in 2011, a modest track record considering some of its competitors’ shopping sprees in recent years.
“We have not been portfolio buyers,” Barnello explained. “We’d love to do a portfolio, if it met our needs and pricing outlook. But the perspective right now is that we can more easily digest and more cleanly underwrite a single-asset transaction.”