By Jon Peterson
(UPDATE: A recent memo submitted to Los Angeles’ Budget, Finance and Innovation Committee indicates that the City of Los Angeles is looking to acquire the property as part of its “Inside Safe” program. The property was initially listed for sale in the latter half of 2022.)
Even as hotel sales across California have slowed down this year compared to last, a group that owns the closed Mayfair Hotel in Los Angles is ready to test the market for investor appetite. The 294-room hotel, located at 1256 West 7th Street, has hit the market with a $69.8 million ($237,414 per key) asking price, according to sources that are familiar with the property.
The current owner of the property is Los Angeles-based ICO Group, which has chosen the Newport Beach office of Maxim Hotel Brokerage to be the listing agent on the sale. One person working on the transaction is Harry Pflueger, a principal with the firm. The current ownership of the property has held title to the asset since December of 2012 when the property was acquired for $17.4 million, as stated in public records.
ICO has just completed a $37 million renovation on the property in 2019. Once the pandemic became a reality, the real estate firm signed a two-year contract with the City of Los Angeles to use the property for Project Roomkey, a city-run program to repurpose the hotel and motel rooms across Los Angeles as temporary shelters. When the contract with the city expired last month, the current owners chose to keep the hotel closed.
There are a couple of possible outcomes of the sale of the property. It could be kept as a hotel, in which instance the guest rooms would need to be renovated again. There is also a possibility that the property could go through redevelopment. One potential use could be student housing, since the property is just three miles from the University of Southern California. Another potential use could be to convert the building to a market-rate apartment complex.
The Mayfair Hotel has a rich history. In 1929, the hotel hosted the first after-party for the Academy Awards. In addition, the property has a total of 15,000 square feet of meeting space and a very spacious rooftop deck with beautiful views of downtown Los Angeles.
ICO is known as a real estate investment firm that is focused on investments located primarily in California and the Southwest, as stated on its website. The portfolio owned by the company includes a mixture of residential and commercial assets. One of its active projects is a redevelopment of a 500,000-square-foot office building at 610 South Main Street in Los Angeles, which the company is looking to convert into 314 apartment units and 20,000 square feet of retail space.
The hotel industry across California saw one of the busiest transactions yeas in 2021, which has seen a decline in 2022. According to a recent, Atlas Hospitality Group’s 2022 Mid-Year California Hotel Sales Survey, the number of individual hotel sales declined by 9.9 percent while total dollar volume fell further by 33.6 percent. At the same time, the median price per room increased by 12.7 percent to a new California record at $143,443.
In Los Angeles County during the first half of the year, the most expensive sale was for the 200-room Godfrey Hotel in Hollywood, which traded for $114 million, or $570,000 per room.
Although sales cooled off somewhat during the first half of 2022 as compared to the record pace set during the same period last year, the report states, it still logged in as the second highest number of sales on record and the third highest in terms of dollar volume.
Atlas does see the pace of transactions in the second half of the year slowing further as uncertainty around the rising cost of debt and the direction of the economy may pose a challenge for investors in the future.
