The Orange County Register
02/23/18

$3.8 Billion Worth of Southern California Hotels Sold in 2017
By Jonathan Lansner

https://www.ocregister.com/2018/02/23/southern-californian-hotels-sales-worth-3-8-billion-in-2017/

Southern California hotels continue to be hot properties with buyers eyeing a flood of visitors paying rising nightly rates and leaving only a modest number of empty rooms.

Atlas Hospitality reports 180 Southern California hotels were sold in 2017 — seven more deals that 2016 and including 17,051 rooms — up 8 percent in a year. And buyers paid up, spending $3.8 billion to acquire Southern California hotels last year, a 22 percent jump above 2016’s deals. The median hotel value, per room, rose 8 percent.

The Atlas report attributes the buying binge to continued investor interest in hotels statewide — especially from the Asia/Pacific region and investors moving out of other commercial real estate niches. Atlas noted that 32 “trophy” hotels, priced $50-million-plus, sold in California in 2017, more than any other state.

Prices and sales volumes rose in most parts of Southern California. Riverside County was a hotspot with a record 31 hotels sold, up nine from 2016 — although per-room values decreased 7 percent. Biggest deal? $160 million for the 884-room JW Marriott Desert Springs Resort in Palm Desert.

Orange County deals rose by one to 23 as the median price-per-room sold fell 5 percent. Priciest deal? $125 million for the 440-room Duke Hotel in Newport Beach. In San Diego County sales rose by eight to 29 as the median selling prices increased 9 percent. Priciest deal? $187 million for the 329-room Park Hyatt Aviara in Carlsbad.

In Los Angeles County, though, sales fell by eight to 50. Maybe there was some sticker shock: per-room values jump 12 percent to a record high. Priciest deal? $280 million for the 286-room The Jeremy in West Hollywood.

Deals were also down in San Bernardino County, down one sale to 26, as the per-room median soared by 37 percent. Priciest sale? $21.5 million for the 115-room Hilton Garden Inn in San Bernardino.

Can the buyer interest continue? Atlas seems to think so, but the report cites several market risks: rising labor costs and interest rates plus a steep increase in new hotel supply.