Remember how opponents warned that a $15 minimum wage would surely cost the city thousands of jobs, hurting the exact same low-wage workers the ordinance was intended to help? Well, in Seattle’s booming hospitality industry, not so much:
The former Red Lion Hotel in downtown Seattle sold Thursday for $130.7 million, or nearly $410,000 a room, the highest price ever paid in the metro area, according to hotel experts.
But the record price for the 319-room hotel, now known as Motif Seattle, could quickly be surpassed by the pending sale of the 120-room Hotel 1000: Two groups are buying it for $63 million or about $525,000 a room, according to a report this week in The Wall Street Journal, which didn’t identify its sources.
“It is the highest price paid (per key) ever for a hotel in Washington state,” said Chris Burdett, senior vice president of CBRE Hotels in Seattle, which was not involved in the transaction.
The record-price deals for downtown Seattle hotels are the latest good news for a surging hotel market that’s kicked off a wave of new construction. Downtown Seattle has roughly 12,000 hotel rooms; the construction of R.C. Hedreen’s mega-convention hotel and smaller hotels could add another 3,000 rooms to the inventory.
Wait. I thought the $15 minimum wage was supposed to destroy capitalism as we know it. And yet in the immediate wake of its passage, investors continue to sink hundreds of millions of dollars into an industry that is one of the city’s largest employers of low-wage workers. I’m so confused!
And it’s not just here in Seattle. Just weeks after SeaTac voters passed their $15 minimum wage, Cedarbrook Lodge, one of the initiative’s most vocal opponents, announced a $16 million 67-room expansion. It’s like the industry’s mouth is saying one thing while its money is saying something entirely else. Weird.
I can only conclude one of two things. Either paying hotel housekeepers and other low-wage workers $15 an hour won’t squeeze all the profits out of Seattle’s labor-intensive hotel industry, or all the smart capitalists investing hundreds of millions of dollars into our soon-to-be-living-wage hotel industry are in fact incredibly stupid.
Goldy, how many new jobs do you think will be created by an existing hotel changing hands?
What you seemingly are cheering is The .01% taking advantage of apparently very little land availability and high construction costs to work their way into becoming The .001%, by purchasing something they won’t have to build.
Of course, they will have to service that debt. Those housekeepers that used to have 10 rooms to clean? Make it a dozen.
Sloppy Travis Bickle,
You are even worse at being an amateur economist than you are at being an amateur propagandist!
@ 2
I just don’t see that a real estate deal occurring after passage of a minimum wage increase ordinance invalidates the concerns of those who think that increase will be harmful, in some ways, to business.
There will be some harm, with the effects currently difficult to quantify. I don’t recall anyone saying that commerce in Seattle would grind to an instant halt.
Two things that I think might be mentioned:
1. Was there a price reduction in the transaction due to the upcoming increase in the minimum wage? The article doesn’t address that, but I think it deserves consideration. Goldy’s right – a lot of money was dumped into the middle of a hotel that will be affected by a substantial increase in the minimum wage. A lot of smart money. If it turns out that the NOI went down because the projected wage costs went up as a result of the future effects of the ordinance, then the income method valuation would take a hit, and it would affect building valuation and possibly purchase price. That would contradict Goldy’s assertion.
2. When something is sold by one business to another business, what usually happens to the little guy who happens to be employed there? Do you think this is more likely to be good, or bad, for the workers in that hotel? What does history tell you?
Add about 10-20 exclamation points and this topic could have been posted by YLB. It’s cheerleading without substance.
Cheap labor conservative is consistent. He posts endless that we should do nothing on ANYTHING would pay the workers more and cut corporate profits and he advocates for ANYTHING that cuts worker wages and cut pensions and worker jobs.
@ 4
You are true to form as well. Happy Saturday.
Woohoo, Cedarbrook Lodge hasn’t even finished their expansion yet and we know it’s a rousing success. Good to see that hotels in SeaTac are immune to future strains caused by overbuilding.
@3 People with money are continuing to invest in Seattle hotels, despite the fact they’ll be forced to pay housekeepers and other low-wage workers $15 an hour. That tells you something about how severely the people with money truly believe a $15 minimum wage will impact their bottom line.
Also, people with money are building an additional 3,000 hotel rooms in Seattle. That tells that employment in the city’s hotel industry will surely go up, despite the implementation of a $15 minimum wage.
Maybe $15 will have a more devastating impact on other industries, but the people running the hotel industry have obviously run the numbers and decided to continue to invest.
@7
That tells you something about how severely the people with money truly believe a $15 minimum wage will impact their bottom line.
Actually, it tells you more about how money managers view commercial real estate investment relative to other ways they can invest their money.
One of the reasons US interest rates are so low is that foreign money keeps being invested in US government debt, despite the very low return. That says less about how great an investment US debt is, when the government is printing money at an unprecedented rate, than it says about how less palatable foreign investors’ other options happen to be. US debt is the least risky. Doesn’t mean US debt is a good investment.
Again, no one expected the city to quit functioning as a result of the minimum wage increase. As such, it’s not a surprise that deals are still being done. If you had evidence that there was no repricing of a deal under negotiation as a result of the minimum wage increase, you would have something to write about, and a point to make in doing so. As far as I know you do not have that evidence.
What you have here is evidence that the sun still rises in the east. It’s a nothingburger.
Here’s a contrary view:
Three years ago the hotel in question was purchased for $71M. It was renovated at a cost of $25M.
http://www.bizjournals.com/sea.....in-25.html
It sold at $126.9M. That’s a 10% annualized gain from the invested $96M. Not especially impressive in a very hot market. Why not hang onto it if it’s such a great property?
For every buyer, there is a seller. Perhaps the seller saw an opportunity to get the hell out.
Bob is a mean-spirited prick..
Just a statement of fact.. No drama needed..
(!)
@ 9
Aw, YLB, don’t take it personally.
I just think you should cheer when the ball crosses the goal line, not when it’s Second and 10.