CHERYL SARFATY THE NORTH BAY BUSINESS JOURNAL

August 17, 2023, 7:09PM

Sales of California hotel properties for the first half of 2023 have fallen more than 53% compared to the same time last year, according to a company that tracks hotel sales.

In its newly published hotel sales survey for midyear 2023, Newport Beach-based Atlas Hospitality said the year-over-year drop is the steepest seen in the 26 years the commercial real estate firm has been in business. Further, hotel transactions priced over $5 million declined by 55% in the same time frame.

“The only other year we have seen such a significant decline was in the first half of 2009, when individual (hotel) sales were down 51%,” the report stated.

The reason is “almost exclusively” because of the “rapid” increase in interest rates, according to Atlas. The prices sellers are looking for don’t align with the cost buyers must pay for loans.

When Atlas released its midyear hotel development report earlier this month, Alan X. Reay, president of the firm, told the Business Journal that high-interest rates have lenders feeling skittish — whether it’s for a hotel project or a hotel sale.

“You have lenders now that are pulling back from making loans altogether,” Reay said in the story published Aug. 8.

Looking at hotel sales in the North Bay through June 30, the largest transaction was the 78-room Vintners Resort and Spa in Santa Rosa. It sold for $42 million, the equivalent of $538,462 per room, according to Atlas.

The Vintners property was purchased by the Jackson wine family and Southern California-based commercial real estate owner, operator and developer Ensemble Investments LLC, the Business Journal reported May 31. The sale included the on-site John Ash & Co. restaurant.

The second- and third-largest hotel sales in the North Bay were in Marin and Napa counties. They were the 235-room Four Points by Sheraton San Rafael and the 48-room SENZA Hotel in Napa. Each sold for $38 million, according to Atlas.

There was a total of 19 hotel sales in the North Bay for the first half of 2023, one more than midyear 2022, according to Atlas.

Eight of the North Bay sales were in Solano County; six in Sonoma County, including Vintners Resort; three in Mendocino County; and one each in Napa and Marin — those being the Four Points and the SENZA hotels, respectively. There were no hotels sold in Lake County, according to Atlas.

In Solano County, the biggest hotel transaction was the 137-room Courtyard by Marriott Fairfield Napa Valley Area, which sold for $16 million. Mendocino County’s largest hotel sale was the 22-room Mendocino Coast Lodge in Albion, which sold for $7.1 million, according to the report.

The smallest transaction in the North Bay was the 22-room Colombi Motel in Fort Bragg, which sold for $1.65 million. The next lowest was $1.96 million for the 7-room Trojan Horse Inn Sonoma.

Atlas reported it is also seeing an uptick in notices of default filings and forecloses, as well as borrowers handing the keys back to lenders.

In the North Bay, Cambria hotel properties in Rohnert Park and Napa went into foreclosure just last month, the Business Journal reported July 26.

Through June 30, eight hotels in California went into foreclosure, the largest being the 394-room Fairmont Century Plaza Hotel in Los Angeles County, according to Atlas. A lender bought it at foreclosure sale for $760 million.

“As long as interest rates stay at their current levels, there is going to be more pressure on sellers and lenders to adjust their price expectation downward,” the report concluded.

Cheryl Sarfaty covers tourism, hospitality, health care and employment. Reach her at cheryl.sarfaty@busjrnl.com or 707-521-4259.