East Coast Firm Buys Sheraton Grande Hotel

An East Coast hotel investment and management firm on Friday said it has purchased the 469-room Sheraton Grande Hotel in downtown Los Angeles and plans substantial renovations of the 14-story property.

Capstar Hotel Co. would not reveal the purchase price, but people familiar with the deal say the hotel sold for $54.5 million and will become part of the Marriott hotel chain. It would be the first Marriott in downtown Los Angeles.

The Sheraton’s purchase price is substantially higher than other recent downtown hotel sales and is an indication that the downtown hotel market is on the rebound after years of disappointing results, according to industry observers. Washington, D.C.-based Capstar purchased the 14-year-old hotel for about $117,000 a room, which is nearly 30% higher than what the nearby Hotel Inter-Continental sold for in January.

“People believe that the hospitality market downtown has tremendous potential for growth and appreciation,” said David N. Sonnenblick, a real estate investment banker who represented seller Metropolitan Life Insurance Co. Sonnenblick said the Sheraton Grande attracted about 15 bidders.

The downtown hotel market has performed better than expected this year, with average hotel occupancy rising to 66.5% from 61.4% in 1996, according to projections by PKF Consulting, which tracks the hotel business. Next year will see further improvement as an increase in major bookings at the Los Angeles Convention Center should send downtown hotel occupancy soaring to about 71%, according to PKF.

Capstar, which owns and manages about 120 hotels, said it will soon begin a $6-million renovation of the property at 333 S. Figueroa St. that also includes a four-story office tower and a four-screen movie theater.