The Los Angeles Marriott Downtown has been purchased out of foreclosure by a Chinese real estate development company that vows to improve the aging hotel, which caters to business travelers.
Shenzhen New World Group Co. got the 469-room hotel at 3rd and Figueroa streets at a substantial discount from its previous sale price as the country's hotel market continues to reel from recession woes.
The price was not formally disclosed, but industry experts believe Shenzhen paid $60 million, according to consultant Alan Reay of Atlas Hospitality Group. It was last sold in 2007 -- when the hotel business was booming -- for as much as $115 million to Los Angeles investment company Namco Capital Group.
Hotel industry revenue began to plummet in October 2008 as the economy soured, and lender GE Capital foreclosed on the downtown Marriott last summer. GE completed the sale to Shenzhen on Wednesday, said Vance Baugham, president of the World Trade Center Assn. Los Angeles-Long Beach, which advised Shenzhen during the acquisition.
The 14-story hotel was built in 1983 as a luxury Sheraton Grande but has suffered from a lack of maintenance in recent years, Reay said. The fact that Shenzhen paid about half of its previous price is in keeping with an industry trend, in which hotel values have fallen 50% or more, he said.
"For that price, it's probably a good long-term deal, but Shenzhen will have to invest a substantial amount to renovate the hotel and bring it up to current standards," Reay said.
Shenzhen plans to spend as much as $13 million on renovations, Baugham said, and will upgrade the hotel's power and water systems to meet modern energy-efficiency benchmarks. The hotel will continue to operate as a Marriott, he said.
This is the first California acquisition for Shenzhen, Baugham said. The company, based in the mainland port city of Shenzhen, north of Hong Kong, is looking to buy other U.S. properties.
"We are definitely seeing more interest from Asian investors in West Coast gateway cities," Reay said. Asian investors have also recently purchased the W Hotel in San Francisco and the L'Ermitage Beverly Hills hotel.
One of the downtown Marriott hotel's newest competitors is a JW Marriott owned by Los Angeles developer AEG that opened in February a few blocks away, near Staples Center. Both brands are operated by Marriott International Inc., with JW Marriott being the more upscale of the two.
"Downtown has added a huge amount of hotel room inventory," Reay said. "It will be interesting to see how these two compete."