West Hollywood’s Sunset Tower Hotel went on the market for roughly $100 million last week, according to a source familiar with the site.
At a price translating to $1.2 million a room, the transaction would become one of the few hotel deals in Southern California to vault over $1 million per unit.
The seller is Thai investor Thosapong Jaruthavee, also known as Mr. T, who purchased an 80 percent stake in the property for about $60 million in 2015 through holding company ER Hollywood. At the time, the hotel’s value was pegged at $75 million.
L.A.-based hotelier Jeff Klein owns the remaining stake in the Art Deco tower that is home to 81 high-end rooms and the Tower Bar and Restaurant.
Jones Lang LaSalle brokers Jeff Davis and Tony Muscio are marketing the site, according to a source with knowledge of the negotiations. Jaruthavee would be able to sell his stake alone, or obligate Klein to sell his stake as well, the source said.
Klein, reached by phone Friday, declined to comment.
Sunset Tower’s average occupancy is about 85 percent, according to a person familiar with the business. Average room rates hit $450 a night, and during Oscars week can ratchet up to $1,200 a night.
Under Klein’s ownership, the Sunset Tower became a Hollywood hotspot that hosts the Creative Artists Agency’s annual Golden Globes party and attracts the likes of Brad Pitt, Angelina Jolie, and Lady Gaga. Between 2009 and 2013, it hosted Vanity Fair’s annual Oscars party, helping brand the inn as a hub for L.A.’s entertainment elite.
Alan Reay, president of Atlas Hospitality Group in Irvine, said investors who offer top-dollar for a hotel like the Sunset Tower are targeting its cache and ample revenues – not the building itself.
Klein’s personal involvement turned Sunset Tower, formerly the run-down Argyle hotel, into a trendy West Hollywood destination.
If Sunset Tower nails a price tag near $100 million, it would join about half a dozen hotels in Southern California that have fetched more than $1 million per room.
“He’s turned the property around, no question. He added to the sizzle of it,” Reay said. “I would be careful of going into this deal with a goal of taking over the management unless you have someone that is as equipped to manage it as Jeff Klein is.”
The Loews Santa Monica Beach Hotel hit $1.4 million per room in its sale to Anbang Insurance Group Co. from Blackstone Group last March. And the Malibu Beach Inn broke California records in 2015 when Hollywood mogul David Geffen sold it to Mani Brothers Real Estate Group for $1.7 million per room.
The Sunset Tower listing comes as more than 750 hotel rooms are under construction along the Sunset Strip at a value of roughly $1 billion – the first influx of ground-up building in West Hollywood in about three decades. That flood of competition could prove challenging to existing hotels.
But Klein said in an interview last year he felt optimistic that newcomer hotels won’t be able to match the historic charm of Sunset Tower, which was once home to stars including Frank Sinatra and Elizabeth Taylor.
“I’m really happy that none of them can ever be a 1929 art deco building,” he said.