Nearly 180 California hotels changed hands in the first half of 2013, a 12% increase from the number sold in same period last year, according to a mid-year report by Irvine consulting firm Atlas Hospitality Group.
The dollar value of these sales grew even faster. The report said the combined value of the sales jumped 24% to a total of nearly $2.2 billion in the first half of this year as investors gambled that the hospitality business will continue to improve.
FOR THE RECORD:
This story incorrectly lists the number of rooms at the Omni La Costa Resort & Spa; it has 607 rooms.
Among the big inns sold were the La Costa Resort & Spa in Carlsbad, the Sheraton Los Angeles Downtown Hotel and the Claremont Hotel Club & Spa in Berkeley.
San Diego County was a major hot spot, with total sales up 200% to $744 million. Leading the way was the $365.8-million sale of La Costa Resort to Omni Hotels & Resorts. The Dallas hotelier rebranded the 479-room inn as an Omni resort.
Another high-profile and historic property was sold in Riverside County’s Coachella Valley. The 796-room La Quinta Resort & Club in La Quinta, which dates from 1926, was acquired by an investment fund of the government of Singapore.
La Quinta, where movie director Frank Capra wrote the screenplay for “Lost Horizon” poolside in 1937, was one of four hotels in a property portfolio purchased by the Singapore investment fund. Also part of the deal was the rambling Claremont hotel, which opened in 1914 in the Berkeley Hills and formerly had multistory spiral slides intended for use as fire escapes.
La Quinta was valued at $109 million, and the Claremont was valued at $511 million in the $1.46-billion transaction that also included the Grand Wailea in Hawaii and the Arizona Biltmore in Phoenix, Atlas said.
The $65-million sale of the Sheraton in downtown Los Angeles to local developer Wayne Ratkovich was the largest in Los Angeles County. Hotel sales in the county were down from a year earlier, but only because owners were reluctant to part with them, said Alan Reay, president of Atlas Hospitality.
“In terms of desirability from buyers, first choice is still West L.A.,” Reay said. That market, one of the strongest in the country, also includes Santa Monica, Beverly Hills and West Hollywood.
Second on buyers’ shopping lists is the Union Square neighborhood of San Francisco, he said, followed by coastal resorts such as those found in Monterey, Orange County, La Jolla and downtown San Diego.
With hotel occupancy and room rates on the upswing, many investors believe hotels will offer better financial returns than apartments and other types of commercial real estate, Reay said. Lenders, who wouldn’t support hotel investments just three years ago, are again willing to finance purchases, and interest rates remain low by historic standards.
Asian hotel buyers find California particularly attractive, he said.
“The Chinese are interested in San Francisco and Los Angeles,” he said. “There is a lot of money pouring out of China.”
The rise in hotel prices will eventually slow as new hotels are built by developers hoping to cash in on the hot market, he said.
“A lot more rooms are going to open up,” Reay said, “and dampen price appreciation.”