Host Hotels paid a lower multiple for its Brooklyn luxury hotel than for a suburban Dallas Renaissance, and the reason is the land it did not buy. To me that is the most useful signal in this week's deal: the largest hotel REIT in the country is willing to own a trophy building on someone else's ground, but it wants roughly one turn of EBITDA off the price for the privilege. Ground leases are no longer a reason to walk away from an asset. They are a line item that gets priced.
On November 4, Host announced two cash purchases. It bought the leasehold interest in the 195-room 1 Hotel Brooklyn Bridge for $202 million, with 83 years left on a ground lease held by a government nonprofit lessor. Host put the price at 10.2 times estimated 2026 EBITDA, or a cap rate of about 8.2%. Separately, it bought the 308-room Renaissance Dallas at Plano Legacy West outright, land included, for about $172 million, which Host said equals 11.2 times EBITDA and a cap rate of about 7.9%.
The operating numbers explain why Host wanted both. The Brooklyn hotel is expected to post total revenue per available room of $1,130 and EBITDA of about $100,000 per key, which would put it among Host's ten best assets. The Plano hotel is expected to earn about $50,000 of EBITDA per key, supported by corporate and group demand in a submarket Host says now hosts more than 75 Forbes Global 2000 companies. Host reported comparable RevPAR growth of 8.8% for the third quarter on the same day.
Here is the arithmetic the release does not spell out. Brooklyn cost about $1.04 million per key, which is $202 million divided by 195 rooms. Plano cost about $558,000 per key, which is $172 million divided by 308 rooms. So Host paid about 1.86 times as much per room in Brooklyn, while each Brooklyn room is expected to earn twice the EBITDA. Per dollar of profit, the luxury hotel was the cheaper buy. In my reading, most of the gap between 10.2 and 11.2 times is the price of not owning the dirt, and on Brooklyn's roughly $20 million of EBITDA that single turn is worth close to $20 million of price.
A second comparison helps. Last week I wrote that Gencom and White Bridge paid about $1.26 million per key for the Ritz-Carlton Central Park. Brooklyn's only branded luxury hotel traded at about 82% of that figure, which is $1.04 million divided by $1.26 million, on a riverfront site that cannot be replicated. Even with the leasehold discount, that is a real price for an outer borough asset, and it tells me institutional buyers now see Brooklyn luxury as a market of its own, not a cheaper version of Manhattan.
At EMC Acquisitions we invest in real estate and hotels in more than 15 countries, and in many of those markets a ground lease is the normal way to own a waterfront or city center site. When we look at one, we value the hotel's income and the lease terms separately before agreeing a number: remaining term, rent reset mechanics, and what happens to the building at expiry. Eighty-three years with a public lessor is a long, stable runway. A lease with thirty years left and an open rent review would deserve a much bigger discount than one turn.
So I read Host's two deals as a lesson in pricing structure rather than location. Buyers who refuse every ground lease will keep losing the best sites to buyers who simply price the lease. The discipline is to know exactly what that discount should be, and to walk away when a seller pretends the land issue does not exist.