Two La Jolla hotels sell for $ 334 million: “It’s like COVID never happened”
Sales last week of two leading hotels in the La Jolla area – the Estancia Resort and Embassy Suites by Hilton – for nearly $ 335 million mark a milestone in a year that has seen a remarkable turnaround in transactions hotel real estate, even in the midst of a pandemic that shows no sign of abating.
The 210-room Estancia La Jolla Hotel & Spa, a short walk from Black’s Beach, sold for $ 108 million, while the 340-room Embassy Suites on La Jolla Village Drive changed hands for 226.7 millions of dollars. Both deals round off a year in which overall sales have already surpassed $ 1 billion, well outpacing volumes of recent years.
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“So the interesting thing is that we’ve been through the biggest depression in terms of the hotel market in living memory and we have prices paid at record highs on a consistent basis,” said Alan Reay, chairman of the firm. Atlas Hospitality studies. Group. “The prices paid for these assets are as if COVID never happened. Buyers don’t look at the numbers for 2020 or 2021, they look at historical revenues for 2018 and 2019 and apply those metrics to pricing. This is how competitive the market is for hotels.
Maryland-based Pebblebrook Hotel Trust purchased Estancia, which already owns seven properties in San Diego County, including the Solamar Hotel in downtown, Paradise Point on Mission Bay, and L’Auberge Del Mar. The resort La Jolla was particularly attractive, said Pebblebrook. CFO Ray Martz, given its location near the beach and a growing life sciences office market nearby, which should boost bookings for business meetings.
The Estancia, which was purchased from Irvine-based Pacific Hospitality Group, is on a long-term lease with UC San Diego that expires in 2066. The pandemic, Martz said, has not gave the company a break in the acquisition, especially the strength of the leisure market which is now ahead of pre-pandemic levels.
“We really love San Diego, especially the La Jolla submarket,” Martz said. “It’s really impossible to build in La Jolla so that’s another positive point. In California, San Diego was one of the top performing markets. San Francisco, for example, is still struggling because its convention center has been virtually closed, people are not back in the office there, and international travel is also on the decline. “
Because the 10-acre property has not been improved for some time, Martz said the company plans to invest in a resort-wide renovation that will most likely begin in late 2022. Improvements will be made. brought to rooms, food and drinks. sites and public spaces like the swimming pool where high-end cabanas will be added. Because the project is still in the planning stages, Martz said he couldn’t provide a price estimate.
“The station has performed well, but due to its location you can get away with a lot of challenges,” Martz said. “The rate for 2021, even though the year has started slowly, is still $ 20 a night compared to what it was for 2019.”
The Embassy Suites hotel was sold by Sunstone Hotel Investors, a real estate investment company with a portfolio of 17 properties. He did not disclose the buyer’s name. The selling price of $ 667,000 per room is pretty steep, Reay said, but it fits this year’s trendline. He noted that the highest price per room ever paid in California was in December 2019, when the Montage in Beverly Hills sold for more than $ 2 million per room. This year, several deals have exceeded that metric, Reay said, including the Montage in Healdsburg and the Four Seasons Napa Valley, which Sunstone has purchased.
To date, 33 hotels in San Diego County have changed hands for a total revenue of nearly $ 1.1 billion, according to Atlas. That’s significantly higher than in 2019, when 21 hotels were sold for $ 767.5 million. Unsurprisingly, hotel real estate activity last year was more anemic, with overall deals valued at just under $ 300 million.
“This tells us that there is a huge amount of capital from investors who want to buy quality assets, that we have record interest rates, and last but not least, we are entering a period of inflation where hotels are considered a very good hedge against inflation. “