California Hotel Deals Up in 2004
California hotels remained popular with real estate investors for a second consecutive year in 2004, as both the number of hotels sold and dollars spent again grew 20% or more.
Investors spent nearly $2.2 billion in snapping up 320 hotels in the state last year, according to a survey by Costa Mesa consulting firm Atlas Hospitality Group. That compared with almost $1.8 billion spent on 267 hotels in 2003 and reflected increases of 23% and 20%, respectively.
Expect more of the same this year, Atlas President Alan Reay said.
“Nothing I see on the horizon would suggest prices will flatten or fall,” he said. “There is tremendous buyer interest across the board.”
Several factors are driving up prices. The hospitality industry has been improving with the economy as a growing number of business travelers and tourists rent rooms.
Also, it’s getting harder to build in desirable locations because hotel developers often are forced to compete with retail and condominium developers for sites. And construction costs are going up. Consequently, fewer hotels are being built.
“It’s getting more like Boston and New York, areas with high barriers to entry,” Reay said.
As a result, trophy properties are getting multiple offers, driving prices higher. Buyers include Wall Street investment firms, real estate investment trusts and pension funds.
One of the top-drawer properties that changed hands last year was the 637-room Renaissance Hollywood, which sold for $88 million, or $138,148 a room. It was the largest sale in Los Angeles County. The county’s highest price paid per room was $289,063 for the 64-room Argyle Hotel in West Hollywood.
Orange County saw the largest increase in median price per room in any major market, 24.8%. The largest single transaction was the sale of the 489-room Irvine Marriott for $92.5 million, or $189,162 a room. The county’s most expensive price per room was $284,468, or $17.6 million, for the 62-room Aliso Creek Inn in Laguna Beach.
The largest transaction in Riverside County was the sale of the 226-room Miramonte Resort & Spa in Indian Wells for $28 million, or $123,894 a room.
The biggest deal in the state last year was for $124.4 million, or $476,628 a room, for the 261-room Ritz Carlton Half Moon Bay in Northern California.
