Hotel sale market is hotter than it’s ever been, especially in the Bay Area

Hotel sale market is hotter than it’s ever been, especially in the Bay Area

By   –  Staff Reporter
San Francisco Business Times

The hotel investment sales market is heating up to historic levels in both the Bay Area and all of California.

Statewide, the first half of 2021 set records for the number of hotels sales (293), dollar volume ($5.26 billion) and highest price per room ever paid statewide (you may have stayed there), per a report from Atlas Hospitality Group released Tuesday.

Those transactions beat the record for first-half hotel sales set in 2017 by 41.7%. The dollar volume surpasses the first-half 2015 record by 22.5%. Sales this year are more than double what closed in the first six months of 2019 — the last comparable period before the pandemic — at 145 deals worth $2.05 billion.

“No one could have predicted the kind of sales numbers and incredible rebound that we have seen in the California hotel market,” Atlas President Alan Reay said in the report. He has said previously that lots of capital was raised because there was a widespread expectation that distressed hotels would hit the market. When that didn’t happen, investors still had money to get into the market seeing its long-term value. In San Francisco, just three deals closed through the end of June — the same as in the first half of 2020 — but the deals were much more valuable, with their total value increasing by nearly 700% to $176 million. That’s a 40.2% decline from the comparable period in 2019, when there were seven transactions worth $294.5 million.

The Alameda County hotel market was much busier. Sixteen deals closed in the first half, compared with just one over the same span in 2020, for a total value of $341.3 million. This is also a big change from the first six months of 2019, when there was just one deal, worth $66.25 million.

Sonoma County experienced the largest increase in total value of anywhere in the Bay Area and in the state. In the first half of 2021 there were 10 transactions worth $328.7 million — more than a 3,300% increase over the value of three deals in same period in 2020 — and dwarfing the $13.8 million in sales across four deals in the first half of “normal” 2019.

The wine country market was buoyed by the prevalence of luxury leisure hotels, the best recovering hotel sector thus far. It was also home to the $265 million sale of the 130-room Montage Resort Healdsburg to Sunstone Hotel Investors for more than $2 million a key.

Other notable sales in the Bay Area in the first half of the year included:

  • The 59-room Alila Venta Inn & Spa in Big Sur sold for $148 million, setting a price-perkey record in the state of $2.5 million and eclipsing the 2019 record for the 201-room
  • Montage Beverly Hills by 21.7%. Check out photos in the gallery above.
  • The 417-room Sir Francis Drake Hotel, sold by Pebblebrook Hotel Trust to Northview Hotel Group and capital partner Angelo Gordon, sold for $157.6 million, or $379,000 a key.
  • The 214-room Four Points by Sheraton Pleasanton in Alameda sold for $75.1 million, or $351,000 a key.
  • The 229-room Sheraton Hotel Milpitas in Santa Clara sold for $82.5 million, or $360,000 a key.

The sales announced last month of Park Hotels & Resort’s Le Meridien San Francisco and Hotel Adagio to undisclosed buyer(s) were not included in the report as they’re still subject to closing conditions, as is the sale of Pebblebrook Hotel Trust’s 189-room Villa Florence. The Le Meridien and Hotel Adagio sales, at $615,000 and $480,000 per key, rank among the top per-key prices of San Francisco hotel sales since 2018, according to data from STR.

More hotels hit the market

Two luxury leisure resorts in Napa — the Vista Collina and The Meritage, both owned by Pacific Hospitality Group — have hit the market, according to a listing from agent CBRE.

The 322-room Meritage Resort & Spa features a 9-acre vineyard, a 22,000-square-foot wine cave and a bowling alley. The 145-room Vista Collina Resort offers the Lawn Bar Cocktail
Lounge (opened last month), seven tasting rooms, its own grocery store and mini retail campus.

Both properties have ample room for hosting mega celebrations, with just over 73,000 square feet of meeting space, indoors and outdoors, between the two of them. The resorts, which include a combined 467 rooms and 36 acres, could fetch as much as half a billion dollars together, per an expert reached by the Napa Valley Register last week. Rural leisure resorts have been the best performing sector during the pandemic, especially compared with urban hotels.

The combined campus for sale includes 5.3 acres slated for a fully entitled 253-room AC and Residence Inn development site, with three commercial condominiums providing additional
back-of-the house space.

In San Francisco, the 230-room Hyatt Place San Francisco, 701 Third St. near Oracle Park and the upcoming Mission Rock development, is available for an undisclosed price, according to a source with knowledge of the listing.

The owner, Denver-based Stonebridge Cos., did not respond to a request for comment. There is also speculation, per another source who declined to be named, that the Napa Valley Four Seasons owner Alcion Ventures is getting closer to picking a buyer among the bidding cohort for the 5-star Napa Valley Four Seasons. The Wall Street Journal reported in February that bids were placing the transaction among the highest ever valued at more than $2 million per key for the 85-room resort, with a total value of $170 million.

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