In a sign of the times for Boston’s beleaguered hotel industry, a popular Kenmore Square hotel just sold at a loss.
Florida-based Xenia Hotels & Resorts last month sold the Hotel Commonwealth to luxury hotel operator Ohana Real Estate Investors for $113 million, $23 million less than Xenia paid for it four years ago.
It’s a rare reversal in price for a trophy piece of Boston real estate, which for the most part has only gone up in value over the last decade. But it has been an unusual nine months in the real estate market, especially for hotels, whose bookings have evaporated amid a pandemic that has largely shut down both business and leisure travel.
Boston has been particularly hard-hit. Through October, it suffered the sharpest drop in business of any of the 25 largest hotel markets in the country, according to Pinnacle Advisory Group, a hotel consulting firm. If that continues, Pinnacle vice president Sebastian Colella said in an e-mail, “We expect to see more hotels close permanently, change hands, and change use.”
The Commonwealth is among the first locally to undergo a change of hands during the pandemic. It’s one of four properties — including a Residence Inn in Kendall Square — that Xenia sold this fall as part of a plan to raise cash to pay off debt.
“Year to date, we have now sold four hotels for nearly $400 million,” said CEO Marcel Verbaas. “These dispositions have allowed us to efficiently raise a significant amount of capital at a superior cost to other alternatives.”
At the Commonwealth, the company is taking a loss to gain some cash. In 2016, the investment group paid $136 million to buy the hotel, which had recently added 96 rooms and extra meeting space.
The 245-room property was hit hard by the loss of Red Sox fans this baseball season and by a sharp drop in visitors to nearby Boston University. Unlike some hotels near college campuses, the Commonwealth did not lease rooms to universities for student housing. And its ground-floor retail space, which is owned and managed separately from the hotel itself, has been dark since the landmark restaurant Eastern Standard closed during the spring.
The hotel’s new owner, Ohana, operates boutique luxury resorts in California; Park City, Utah; and Cabo San Lucas, Mexico. This is its first property in Boston. The company declined to comment but said the Commonwealth’s longtime managers, Sage Hospitality Group, would stay in place and that no major physical changes are planned.
Along with built-in business ― during normal times ― from Red Sox fans and Boston University visitors, the Commonwealth has the advantage of being in a part of town where development has been surging. Developer Related Beal is turning the buildings beneath the Citgo Sign, across Kenmore Square, into lab and office space. It’s also about to start work on a large life-sciences-oriented tower above the Massachusetts Turnpike at Fenway Center.
Fenway Sports Group also recently unveiled plans for a major development project around Fenway Park that could eventually extend over the turnpike, behind the Hotel Commonwealth.