The hospitality industry continues to make a grand comeback, and a new hotel-focused real estate firm in Boston is hoping to cash in on the trend.

Most real estate folks were surprised – except, of course, hoteliers who have been predicting the surge – when hotel stocks turned in the best returns in the industry over recent months. Returns are improving across the sector, and for a couple of years hospitality industry execs have been encouraging re-investment in their own firms. Now, brace for a resurgence in investment from outside.

A new firm in Beantown will focus on the sale and financing of hotels, resorts, inns and restaurants. The company, called O’Connell Hospitality Group, LLP, is Boston’s first new hospitality real estate transaction firm in more than a decade.

O’Connell plans to represent sellers and buyers nationally. In addition to traditional real estate transactions, the new company will source funding of both debt and equity.

“In today’s capital-constrained markets, simply providing transaction services is not enough,” said James O’Connell, principal of the firm. “We have developed a substantial track record working with Wall Street and institutional lenders in arranging placements of between $5 million and $50 million. We expect to play a role in the financing of approximately half of the transactions we handle.”

Mr. O’Connell brings an impressive record to bear. Formerly senior managing director of Horwath Landauer, O’Connell formed the hospitality consulting firm’s national transactions team. He also was one of the original members of Insignia/Hotel Partners, a large hotel brokerage firm.

O'Connell will concentrate on three- and four-star hotels, limited service through first-class, full-service properties, boutique hotels and resorts. In addition, the firm will assist urban and suburban landowners with hotel development projects.

The company’s Boston-based restaurant division will focus primarily on New England properties.

“The combination of restaurants and hotels is a good fit because there often is an overlap in ownership,” O’Connnell said. “Our market will include national franchise and high-end independent restaurants. Our firm also provides consulting services, including positioning, concepting and operations analysis.”

Meanwhile, on the other coast, an interesting fight is developing over the sale of the well-known One Embarcadero South, a San Francisco luxury residential property located directly across from Pacific Bell Park in the city's booming South Beach area. Just goes to show that hot commercial development can create stunning circumstances, even in the residential arena.

Dallas investment group Eikon Investments, LLC, recently bought the condos from Urban West Associates of San Diego and its president, Mike Kriozere, the building’s original owner and developer. The condos cost $750,000 and up, and were completed just this year.

About 25 tenants currently occupy units at the property through existing lease agreements, which Eikon says it will honor. Eikon is also providing the tenants with the right of first of refusal to purchase at the property.

“There will be no bidding wars, no auctions, no see-how-high-we-can-jack-up-the-price schemes,” said Zack Davidson, president and CEO of Eikon. “It will be a civilized sales program, based on a first-come first-serve basis. That’s the way people who are spending this amount of money expect to be treated, should be treated and will be treated.”

Units range in size from 643 square feet to 1,591 square feet. For $250,000 each?

“With its location in the center of San Francisco’s hottest new neighborhood, this property is a gold mine," said John Jensen, a San Francisco real estate expert with Grubb & Ellis. “The building’s views of the city skyline, Bay Bridge and water are spectacular. One Embarcadero South will be one of San Francisco’s most sought-after residential properties when the units go on the market in September.”

The complex has 233 units and three towers, with the tallest reaching 14 stories. They adjoin a three-story podium level and a landscaped pool, spa and patio area, which provides the property with an urban resort-like common area.

Published: July 18, 2000

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