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Breaking News in Beverly Hills, CA the L’Ermitage hotel is on the Market

Posted on Jan 8, 2010 by in Active Rain | 0 comments

Breaking news in Beverly Hills, CA the L’Ermitage hotel is on the market. I was reading in the Commercial Real Estate News syndicated by LoopNet that there are multiple offers on The Raffles-L’Ermitage Hotel.

 At first glance one would think, this is fantastic, on the other hand we need to look at the Real Story here. In the year 2000 the Beverly Hills property was acquired for $68 million

This was major news then, since the per-room price at the time was a record for a Los Angeles area hotel not being on the beach.

 Since then the property’s performance has slumped. The occupancy rate is down to about 65% and without saying so is the cash flow. That means based on sources reporting a  high bid of $40 million and a cash flow of $1 million translating to a  Capitalization Rate of 2.5% , which is  hard to believe, when full service luxury hotels in the area have been selling at a cap rate of 8%-9%.

 This is very telling.


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