Major Hotel Sales in California Flat as Buyers Think Smaller

Sales of costlier California hotels remained flat during the first half of the year as investors passed on high-end properties to focus their attention on smaller, less prestigious hotels, according to an industry survey released Monday.

With financing scarce and hotel real estate investment trusts on the sidelines, sales of hotels priced above $5 million plunged nearly 40% in the first half of 2000 from the same period last year, according to Atlas Hospitality Group, a Costa Mesa-based hotel broker. A total of 162 properties changed hands during the first half of 2000.

“We are getting a tremendous backlog of properties on the market [priced] above $5 million,” Atlas President Alan Reay said. “Buyers are being cautious because financing is very, very tough to get.”

In Los Angeles County, the large demand for smaller, less expensive hotels boosted the number of sales by 30% to 47 while the median sales price per room declined 3.22% to $27,096. (The figures do not include the sale of the former Hotel Intercontinental in downtown Los Angeles, for which a sales price was not made available.)

Investors expressed a preference for older Class B and C properties outside prime lodging markets in Los Angeles County, Reay said.

In Orange County, investors purchased 19 hotels in the first half, down nearly 14% from the same period last year. The median sales price per room fell 7.7% to $51,064.

The largest sale reported in the state during the first six months of the year was San Francisco’s nearly 1,200-room Westin St. Francis, which was sold in April to a New York investment group for $243 million.