Family Is Selling Huntington Hotel, Nob Hill Fixture, but Allure Is Faded
July 31, 2010 in Uncategorized
Family Is Selling Huntington Hotel, Nob Hill Fixture, but Allure Is Faded
By ELIZABETH LESLY STEVENS
Published: July 31, 2010
Theo Rigby/The Bay Citizen
The Huntington Hotel atop Nob Hill.
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Adithya Sambamurthy/The Bay Citizen
A suite at the hotel in an undated photo.
Adithya Sambamurthy/The Bay Citizen
The Huntington Hotel is for sale by John J. Cope and two of his siblings.
He has spent the last 33 years walking the Huntington’s historic hallways and checking on the ambience of its dim, clubby Big Four lounge. On a recent weekday evening there, the pianist softly played “As Time Goes By” to a nearly empty room.
The Cope family, among the last of the proud owner-operators who once ruled this city’s hotel scene, is trying to sell the famed but faded hotel that the extended clan has owned since the 1920s.
In an effort to avoid a crushing tax bill that Mr. Cope said would claim 68 percent of the proceeds, the family will sell the Huntington and its two other hotel properties — La Playa in Carmel and an interest in the Galleria Park Hotel in the Financial District — only bundled within a corporate entity.
Industry sources said the Copes hoped to pocket $80 million to $100 million. The Sir Francis Drake Hotel sold for a healthy $90 million in June. But a thicket of tax issues and legal entanglements may render the Huntington essentially unsalable.
Newton A. Cope, the family patriarch, cut a glamorous figure in the 1960s and 1970s, when the Huntington, perched atop Nob Hill, was the luxe hotel in town and known for its celebrity clientele. In the late 1970s he was engaged to Lee Radziwill, Jacqueline Kennedy Onassis’s sister, who redecorated some of the Huntington’s rooms and suites.
Mr. Cope died in 2005, and his seven children split his assets, which include many of the buildings ringing Nob Hill. The three older Cope siblings (products of a first marriage) took the hotels, while the younger siblings, all named Fritz-Cope (their mother was Dorothy Fritz-Cope, the real estate heiress, who died in 1976) took a Napa restaurant and several Nob Hill apartment buildings, including the Brocklebank Apartments, made famous in Alfred Hitchcock’s “Vertigo.”
Bids for the hotel properties will most likely be due by mid-August, Mr. Cope said.
If he manages to sell the Huntington, it will be the passing of an era. Other than the family that owns the humbler Handlery Union Square Hotel, John Cope is the last old-school hotelier left in the city.
But the hotel has not been renovated to keep pace with newer super-luxury hotels in San Francisco like the Four Seasons and the St. Regis. As a result, the Huntington is seen in the industry as somewhat shabby. It lost about $2 million last year, said a person who has reviewed the financial statements but declined to be identified due to a confidentiality agreement.
Such a loss, on a property with almost no debt and negligible property-tax payments, “begs a question: Why not close it?” that person said. That would void what he characterized as an “egregious” union contract and make the property easier to sell.
Such hardball does not seem to be Mr. Cope’s style. Though he is a youthful 59, his manner is that of an “ultimate host, practicing hospitality in what some might call an anachronistic fashion,” said Rick Swig, a hotel consultant who comes from the San Francisco hotel family that owned the Fairmont Hotels.
Mr. Swig said the Copes had long been about “the comfort of guests, not maximizing every last penny on the bottom line.”
“It is the antithesis of what new owners of hotels are all about, making that last bit of money,” Mr. Swig said.
Mr. Cope works at the Huntington with his two older siblings, who, he said, are eager to retire. The hushed, discreet mood in the common areas makes the hotel seem very much a relic of a vanished age. It “has been our lives,” he said, adding that “it is incredibly unnerving” to sell.
As Mr. Cope led a tour of the hotel recently, he paused to point out the framed treasures of California history collected by his father and displayed throughout.
“Everything is wrapped up in this transaction,” he said of the proposed sale. “Our lives, our retirement plans, our children’s inheritance. All in one deal.”
Mr. Cope said that in the three months the hotel had been on the market, he had given tours to 40 prospective buyers. Real-estate investment trusts, high-end hotel companies and “high-net-worth individuals” who have made luxury hotels a hobby in recent years have been kicking the tires.
But looking is not buying, and several industry experts cautioned that the problematic corporate structure of the deal might mean that the Copes’ call for offers in mid-August will be met with a muted response. Most crucially, the corporate structure means that a buyer would not be able to claim huge tax deductions for depreciation.
“It’s a deal-killer for a lot of people,” Mr. Swig said of the arrangement.
Another stumbling block is the Interwest Capital Corporation, which owns the Galleria Park Hotel in the Financial District. The Copes own the ground lease for land beneath the hotel, and that asset is included in Nob Hill Properties Inc., the family’s corporation.
Interwest Capital has a right to match any offer for Nob Hill Properties, according to the person who had reviewed the offering documents. That makes prospective buyers leery, since it can swoop in and scuttle another buyer’s deal.
What is more, a new buyer would need to play quite a bit of catch-up to bring the Huntington up to par with the newer luxury hotels in town.
“The Huntington pretty much looked the same as it did in the last 40 years,” Mr. Swig said. “The Huntington fell behind. It is that simple.”
Mr. Cope shrugs off any notion that he and his siblings are under pressure to sell. The only pressure, he said, is the desire to collect their inheritance now, rather than wait out a decade-long holding period that would allow them to avoid the bulk of the tax bill when they sell the hotels. To preserve family-owned businesses, tax law allows families that continue to operate a family business for 10 years after an owner’s death to avoid steep taxes.
“This is not like a fire sale,” Mr. Cope said, adding that if the family did not get an acceptable offer it would probably take the hotel off the market.
“There’s a 50 percent chance we end up keeping the property, and I do this for another seven and a half years,” he said. “So I hunker down, and keep working.”
