David P. Leatherwood reportedly has found a buyer for the Onyx Hotel in Boston, which the Vermont developer opened last spring.
David P. Leatherwood’s own Onyx Hotel tour is apparently coming to an end, with the developer of the 4-star Boston inn reportedly opting to sell the 112-room property to a Maryland-based real estate investment trust. According to industry sources, the Onyx Hotel at 155 Portland St. in the city’s North Station district will trade at between $25 million and $30 million. The reported buyer is LaSalle Hotel Properties, which already owns the Harborside Hyatt Hotel at Logan Intenational Airport.
“They do have it under agreement,” one commercial real estate sales specialist told Banker & Tradesman last week of LaSalle, with the source describing the deal’s completion as “imminent.”
A Vermont developer who has constructed several hospitality properties in Greater Boston during the past decade, Leatherwood opened the Onyx last spring, selecting Kimpton Hotels to flag the operation. The project’s completion coincided with music star Britney Spears’ 68-city Onyx Hotel music tour, inspiring Kimpton to design one of the Boston units in a Spears motif that replicates the bedroom the singer was raised in as a child in Louisiana. A charity promotion offered two tickets to the Spears concert last June in Boston as part of a package that included an overnight stay in the special Onyx room.
The pending acquisition of the Onyx by LaSalle comes amidst a rebound in the hospitality market, with years of economic turmoil and the brutal aftermath of the Sept. 11, 2001, terrorist attacks finally yielding to improving conditions. Revenues and occupancy rates have both grown significantly in the region during the past year, offering a measure of so-called “pricing power” that had been absent for hotel operators during most of the new millennium. (See related stories in Banker & Tradesman’s Commercial Real Estate Monthly special section on the hotel market in this issue.)
One source tracking the Onyx deal pegged the price at about $28 million, which would translate to nearly $260,000 per room. Efforts to confirm those numbers were unsuccessful, with neither Leatherwood nor LaSalle officials available to discuss the situation by Banker & Tradesman’s press deadline. Whatever the final price might be, sources insisted that LaSalle does have the Onyx Hotel under agreement, although it is unclear how far along the negotiations are or whether a closing date has been established.
Boutique in Boston
The Onyx is one of several boutique hotels that have opened in Boston and Cambridge during the past few years, reflecting the relative strength of the urban hotel market. Although that sector was certainly hampered by the market’s lingering difficulties, the Hub and Cambridge hotel scene fared much better than suburban hospitality assets, prompting the construction of such new operations as the Jurys Doyle Hotel and a Courtyard by Marriott in Boston’s Back Bay district, as well as the Hotel Marlowe in Cambridge and the Onyx and Bulfinch hotels in the city’s North Station area. The Bulfinch Hotel was developed by another local real estate player, Cresset Development LLC. Meanwhile, some properties have changed flags, including the recent switch of the Swissotel in Boston’s Downtown Crossing to the Hyatt Regency.
The Onyx and Marlowe hotels both opened at about the same time, providing San Francisco-based Kimpton a quick foray into the Bay State hotel market. The hotel operator has been credited for creating an appealing design at the Onyx that has proven popular in the months since the property opened. Others, however, attribute the successful venture to Leatherwood’s ability to overcome a constrained parcel and a difficult economy to get the Onyx permitted and constructed, with work on the Portland Street facility commencing in 2002 just as the hotel market was beginning to crater.
Leatherwood previously had built a series of motels in suburban Boston, including a cluster of three assets in Peabody that offer several hundred rooms. Among them are a Homewood Suites, a Hampton Inn and a Summerfield Suites. In an earlier article in Banker & Tradesman coinciding with the Onyx Hotel’s construction, Leatherwood predicted that the project would be “a grand slam,” voicing long-range confidence in the city’s hotel market. According to the source tracking the current sale, Leatherwood should indeed fare well if the project trades close to the $28 million figure being circulated in the real estate grapevine. “That’s a very good deal” for Leatherwood, the source opined.
LaSalle made its first move into Boston seven years ago when it paid $73.5 million for the Harborside Hyatt Hotel, with company officials citing improvements at Logan as a key reason for its commitment. The 270-room Harborside Hyatt had been purchased from AEW Capital Management. According to LaSalle’s Web site, the firm currently owns interests in 21 upscale and luxury hotels, with a target on urban, resort and convention markets. Traded on the New York Stock Exchange under the LHO symbol, LaSalle hotels are located in such cities as Chicago, Dallas, San Diego, New York City and Washington, D.C.
