GEM Realty Capital buys California resort for $100M

GEM Realty Capital buys California resort for $100M

Biggest hospitality deal in San Diego area this year

JUL 29, 2023, 1:00 PM

By TRD Staff

In what stands as the region’s largest — and California’s third-largest overall — hospitality deal this year, Chicago-based investment firm GEM Realty Capital bought The Inn at Rancho Santa Fe, a luxurious resort in an affluent enclave near San Diego, for $100 million, CoStar reported.

The seller was Steve Hermann Hotels of Montecito, California. 

According to CoStar data, Hermann purchased the 80–room property — built in 1922 in the unincorporated village of Rancho Santa — in May 2022 for about $42.7 million and subsequently embarked on a comprehensive renovation that is currently underway. The renovations are expected to be finished late this year.

Sonnenblick-Eichner's Elliot Eichner (Sonnenblick-Eichner)
Elliot Eichner

Elliot Eichner, principal at Sonnenblick-Eichner, the brokerage representing the seller, said that the buyer recognized the opportunity to acquire a five-star luxury resort in a market with significant barriers to entry. 

The acquisition comes amid a resurgence in travel as the Covid pandemic recedes.

Sonnenblick-Eichner's David Sonnenblick (Sonnenblick-Eichner)
David Sonnenblick

David Sonnenblick, also a principal at Sonnenblick-Eichner, said that despite an environment of high interest rates and recessionary concerns, substantial capital remains available from both institutional and private investment funds for “quality transactions.”

The acquisition of the Inn at Rancho Santa Fe represents the most significant hotel deal in the San Diego region for 2023, according to CoStar data as of July 25. Additionally, it ranks as the third-largest hotel transaction in California this year by total price and the state’s largest deal in terms of per-room pricing, at approximately $1.25 million per room.

Alan Reay, president of hotel brokerage and research firm Atlas Hospitality Group, noted that this year’s California hotel transactions were only surpassed by the $163.3 million Claremont Resort deal in Berkeley and the $112.5 million deal for Standard West Hollywood near Los Angeles.

Atlas Hospitality Group reported that the travel and tourism industry’s rebound facilitated California’s posting of its second-highest annual number of hotel property deals on record last year, reaching 483 deals, a mere 5.3 percent decrease from the record 510 deals in 2021. California also recorded its third-highest dollar volume for hotel transactions in 2022, totaling nearly $8.6 billion.

Rancho Santa Fe is known for its other high-end resorts as well as some of the region’s wealthiest households and most expensive homes.

— Ted Glanzer

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