Cambria hotels in Napa, Sonoma counties lost in $80 million foreclosure

Cambria hotels in Napa, Sonoma counties lost in $80 million foreclosure

Jennifer Huffman | Sep 6, 2023 Updated 8 hrs ago

The 90-room Cambria Hotel Napa Valley, which opened in 2021 after three years of construction, has been officially lost to foreclosure.

The Cambria’s developer, Stratus Development of Irvine, no longer owns the Soscol Avenue property. That foreclosure also includes a Cambria hotel in Rohnert Park, in Sonoma County.

Both Cambria hotels now belong to the lenders who financed the project. Listed as MRC Ca Lender V, the limited-liability corporation is an affiliate of Madison Realty Capital.

A total of $80 million was owed to lenders. However, according to the company that hosted the foreclosure sale on Aug. 25, the properties were “sold” back to the lenders for a total of $59 million.

A couple waits for a ride outside the Cambria Hotel Napa Valley at 320 Soscol Ave.Jennifer Huffman, Register file photo

However, the financial foreclosure doesn’t mean Cambria’s doors are closed to Napa Valley and wine country overnight guests.

Cambria Hotel area general manager Michael Palmer, formerly the GM of the Meritage Resort and Spa in south Napa, said that the Cambria Hotel Napa Valley is open for business “and continues to operate as usual with no interruption to guest service.”

Guests may confirm their reservations via their original booking method, he noted. However, “the hotel team looks forward to hosting incoming guests and continuing to be an active member of the Napa business community,” said Palmer.

Cambria Napa Valley is located at 320 Soscol Ave. in Napa, near the south end of the Silverado Trail. It opened in August 2021; Cambria Hotel Sonoma Wine Country opened in August 2020.

In an email statement, David Wood from Stratus Development said: “All employees have been retained and the guest experience has not been affected.”

Representatives from MRC did not respond this week to an interview request about the Napa hotel or its Sonoma County counterpart.

A courtyard at the Cambria Hotel Napa Valley, on Soscol Avenue in Napa.Jennifer Huffman, Register file photo

Hospitality industry expert Alan X. Reay, president of Atlas Hospitality Group, said he was aware of the foreclosure. Reay said his company is aware of some hotel defaults, but the Cambria defaults are “a bit surprising given that these are brand-new and in good locations.”

Joe Fischer, senior vice president with Strong & Hayden Commercial Real Estate, said that “given the underlying economics of the Napa hospitality market,” the Cambria foreclosures surprised him as well. 

To Fischer, these two foreclosures “are really an anomaly in our market,” and “I would characterize them as ‘operator failures’ instead of ‘market failures.’”

“Contrary to what nearly all other hotels are doing, it appears the hotel operator failed to perform on two key revenue metrics over the last year (average daily rate and occupancy) and that is the source of their woes,” he wrote.

“I still believe that the two Cambrias are exceptional properties — they just need the right management to capitalize on the underlying hospitality economics of both Sonoma and Napa,” said Fischer.

Room rates for a single-night stay from Sept. 9 to 10 started at $429 per night, according to the Cambria website.

In an April interview with the Napa Valley Register, Wood said that Stratus was confident it could work out an agreement with its lenders.

The default was due to several factors, said Wood.

First, commercial real estate interest rates have more than doubled, going from 6% to 14%, he said at the time. Second, heavy North Bay rains over the winter led to lower occupancy at the Cambria hotel. This led the group to request a loan modification.

“The lender is working with us but in order to do that they had to move the loan to a workout ‘bucket,’ which required a (notice of default) filing until the negotiations are complete,” he said in April, adding that the process would take several months.

In 2018, Choice Hotels International Inc., franchiser of the Cambria Hotels brand, announced it entered into a multi-unit agreement with Stratus to develop five Cambria properties.

Cambria co-developer David Wood, former Napa County Planning Commissioner Michael Basayne and Andrew Wood talked during the opening of the Cambria Hotel Napa Valley hotel in October 2021.Jennifer Huffman, Register file photo

Those locations were said to include Napa; Santa Clara; Rohnert Park; Orlando, Florida; and another site in the Bay Area.

Wood also noted that there has been no change in the Stratus partners’ plans to develop the Hotel Oxbow in the 700 and 800 blocks of First Street.

The Oxbow hotel with a total of 74 rooms and two four-story buildings — with the Napa Valley Wine Train tracks running in between — narrowly won approval from the City Council in November 2020. That project totaled 122,666 square feet.

However, in March, Stratus Development, asked for permission to build 123 rooms and two four-story buildings, one on either side of the railroad tracks.

“To make this project economically feasible and attract a national franchise firm, more rooms are required,” said the application from Stratus.

“I really don’t think the Cambria foreclosure and reversion to the bank will have much impact on the Hotel Oxbow project,” said Fischer.

“It is true that you have Stratus in the mix on this deal, but every deal is different,” he said. “Sure, Stratus will have a black eye in the debt market because of walking away from Cambria, but Hotel Oxbow is a different, higher-end project with a different equity mix.” 

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