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Carlsbad's Park Hyatt Aviara sells for $170 million more than a year after being taken over by its lender

Carlsbad's Park Hyatt Aviara sells for $170 million more than a year after being taken over by its lender
The 222-acre Park Hyatt Aviara Resort in Carlsbad has been sold for $170 million, which averages out to about $517,000 a room. (Charlie Neuman)

The upscale Park Hyatt Aviara resort, which was taken over by its lender more than a year ago following missed payments, is now under new ownership.

Xenia Hotels & Resorts, a Florida-based real estate investment trust that owns 41 hotels across 17 states, including the Andaz in downtown San Diego, announced last week that it paid $170 million for the 327-room resort and golf course.

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The selling price is considerably below the $251 million paid by former owner Broadreach Capital Partners in 2007 to acquire a controlling interest.

Xenia CEO Marcel Verbaas acknowledged the price’s appeal in a news release.

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"Our ability to purchase the resort at a price substantially below replacement cost and well below those of comparable resorts in the region provides a significant value creation opportunity for the company," Verbaas said.

Xenia executives declined to discuss the sale or their plans for upgrading the 222-acre resort but hinted in the news release that there will be upcoming improvements.

"We see substantial opportunities to enhance financial performance at the resort through our asset management initiatives as well as a comprehensive capital plan to elevate the resort above its prior competitive positioning,” Verbaas said. “We look forward to working with Hyatt to improve the asset physically and operationally which we believe will improve the resort's regional and national appeal and result in strong growth in revenues and profitability."

Xenia’s purchase makes the Park Hyatt the third largest hotel sale so far this year, behind the $250 million paid for the 805-room San Jose Fairmont in January and the 668-room Grand Hyatt San Francisco, which fetched more than $575 million in March.

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Although it’s been almost 1 ½ years since the Park Hyatt was taken over by its lender, CW Capital Asset Management, a sale probably took longer because the property includes a golf course, speculates broker Alan Reay.

Increasingly, more and more golf courses are closing, and in California they can be expensive to operate given the dry conditions and the cost of water, said Reay, CEO of Atlas Hospitality.

“Most properties in San Diego are back at the peak levels of 2007 or above so it's interesting that this property did not get back to that level, and one of the main reasons for that is the golf course,” he said. “Whenever we're working on a hotel with a golf course associated with it, most buyers are not interested. It’s not what it used to be.”

Last year’s transfer to CW Capital came after years of missed payments and a five-year loan extension and lowered interest rate that was granted in 2011.

The per room price paid by Xenia works out to about $517,000, which is significantly lower than the $600,000, $700,000 per room price that upscale hotels have been commanding, Reay noted.

“I think they'll definitely get room rates up if they make improvements, but the big question is what do you do with the golf course,” Reay said. “In many instances, we're seeing golf courses sold off and then people do residential or a different development on that.”

The Park Hyatt was not always a Hyatt-managed property. In 2009, the resort was at the center of a very public feud when Broadreach sought to oust the hotel's longtime operator, Four Seasons Hotels and Resorts.

Although Broadreach had tried to immediately remove Four Seasons, contending that it had failed to run the property in a "cost-effective manner, " the matter ultimately went to arbitration.

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A three-member panel eventually decided the two parties should terminate their relationship, but also concluded that both sides had "contributed to the demise of the business relationship."

A year later, Aviara became a Park Hyatt. It has been designated as a Forbes Five-Star and AAA Five-Diamond luxury property.

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