Grand Del Mar hotel to be sold

The Grand Del Mar, one of the county’s top five-star resorts, is being sold next week to the Fairmont Hotels chain and a Northern California investor, although owner “Papa” Doug Manchester will retain a minority stake.

The deal is expected to close next Wednesday, said Manchester Financial Group President Dick Gibbons. Manchester is also publisher of U-T San Diego. As part of the change in management, the hotel will be re-branded as the Fairmont Grand Del Mar.

While the purchase price was not disclosed, Gibbons said that together, financier Richard Blum’s private equity firm, Blum Capital, and Fairmont’s parent company, FRHI Hotels & Resorts group, will be acquiring an 88 percent share of the resort, valued at $230 million. Manchester, who opened the 249-room Carmel Valley hotel in October 2007, will retain a 12 percent interest.

“This represents a diversification of our investments and is an opportunity to invest with Blum Capital and Fairmont,” Gibbons said. “The affiliation with Fairmont’s worldwide marketing efforts is a strong contribution, and the relationship with Blum Capital is a strong one for this transaction and future transactions.”

Blum, the husband of Sen. Dianne Feinstein, D-Calif., partnered last year with Toronto-based FRHI, which operates Fairmont and other luxury brands, to purchase the Claremont Hotel Club & Spa in Berkeley.

“The acquisition of the Grand Del Mar, one of the most revered luxury hotels in the United States, aligns with our investment strategy and perfectly complements Fairmont’s unrivaled portfolio of hotels in the California market and abroad,” said Blum, president of Blum Capital. “We look forward to showcasing this remarkable asset to an even greater audience and working with a celebrated brand like Fairmont to further enhance the property’s award-winning reputation.”

Fairmont will also be managing Manchester Texas Financial Group’s new 1,066-room convention hotel in Austin, due to open in June of 2017. Manchester Texas Financial is a subsidiary of Manchester Financial Group.

“With the beauty and climate of San Diego attracting travelers from all over the world, we’re extremely pleased to be adding an asset of this caliber to our hotel collection,” said William Fatt, CEO of FRHI. “We’ve aligned with some great partners and are very happy to be working with Blum Capital and Richard Blum on this very exciting deal, which will further expand our already strong presence in the California market.”

The Grand Del Mar will join a collection of notable Fairmont hotels, among them the iconic Fairmont San Francisco, The Plaza in New York, and landmark Savoy in London.

Over the last several years, the nearly 400-acre resort has racked up an impressive number of accolades, most notably a prestigious triple five-star rating four years in a row from the Forbes Travel Guide for its accommodations, as well as for dining and its spa. Only six other resorts in the nation have received such a distinction. It was also named TripAdvisor’s No. 1 luxury hotel in California in 2014 and is a AAA five-diamond hotel.

“We’re truly fortunate to have one of our cherished assets joining the Fairmont Hotels & Resorts under the leadership of Richard Blum,” said Manchester. “This new relationship assures that the property will continue on the world stage in perpetuity.”

At the time the Grand Del Mar opened more than six years ago, the project was estimated to have cost $270 million to develop, including the value of the land. Since then, the resort has sold fractional interests in the property’s eight 4,500-square-foot villas, as well as memberships in the Grand Golf Club, Gibbons pointed out. The resort has approval to build a total of 39 villas, he said.

The Grand Del Mar transaction is emblematic of the growing appetite among investors for elite luxury properties, said hotel consultant and broker Alan Reay. He noted that the $230 million valuation of the San Diego resort, which translates to roughly $925,000 a room, is in line with recent higher-end hotel sales.

“There has been a lot of activity recently in the sale of trophy hotels, as sellers are able to realize record prices,” said Reay, who heads Orange County-based Atlas Hospitality Group. “Examples are the Montage in Laguna Beach and the Baccarat Hotel in New York, which sold for $1.4 million and $2 million per room, respectively.

“Buyers are looking to park money in safe investments that have huge barriers to entry, and Fairmont is a very good operator in luxury upscale brands.”

In addition to its highly regarded fine-dining restaurant, Addison, the hotel is known for its Tom Fazio-designed golf course, 20,000-square-foot spa and heavily landscaped grounds. It also houses boutique shopping outlets and 27,000 square feet of meeting space, including a 10,000-square-foot ballroom.

At the same time Manchester is downsizing his ownership interest in the Grand Del Mar, he is moving ahead with his $60 million plan to redevelop the U-T San Diego parking lot with a 200-unit luxury apartment complex and parking garage. Development manager Perry Dealy said the project is scheduled to go before the San Diego Planning Commission by late April or early May, clearing the way for construction to begin in early 2016.

Still pending is Manchester’s $1.3 billion plan to redevelop the 16-acre Navy Broadway Complex on the downtown waterfront with hotel, retail and office uses. A legal dispute with the California Coastal Commission over the master plan has stalled the project.

Manchester was the developer of two of downtown San Diego’s largest waterfront hotels, the Manchester Grand Hyatt and the Marriott Marquis San Diego Marina. He no longer owns either one. Manchester sold the 1,625-room Hyatt in 2011 for $570 million, at the time the priciest hotel transaction in California.

Last weekend, Manchester closed his La Jolla restaurant, Bijou, which he opened two years earlier as Amaya.

Grand Del Mar President Thomas Voss will be leaving the resort next week as new management takes over hotel operations, but he will continue to work with Manchester Financial, Gibbons said. All of the resort’s 400 other employees, he said, will be retained.