BY LORI WEISBERG

JULY 25, 2023 5:33 PM PT

Just a year after the Inn at Rancho Santa Fe was sold to a luxury resort operator, the century-old property has been sold yet again — this time for $100 million.

While the sales price is more than twice what former owner Steve Hermann paid over a year ago, the century-old property is in the midst of a $50 million renovation that the hotel announced in late May would be completed by late summer. That has now been delayed until November.

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The sale, announced on Tuesday, marks the third-highest hotel transaction in California so far this year, and, more significantly, it is the highest amount paid per room — nearly $1.2 million — for any hotel acquired this year in the state, according to the brokerage, Atlas Hospitality Group. The two priciest overall hotel sales so for this year have been the Claremont Resort, Berkeley, at $163.3 million, and the Standard West Hollywood, at $112.5 million, said Alan Reay of Atlas Hospitality.

The 21-acre hacienda-style Rancho Santa Fe property, at one time owned by Petco Park developer JMI Realty, was sold to Chicago-based GEM Realty Capital, according to CoStar. GEM, a real estate investment company, describes itself as an investor in both private-market real estate assets and publicly traded real estate securities.

Among its diversified portfolio of holdings are a few other hotels, including the Westin Phoenix Downtown and Carneros Resort and Spa in Napa, said Emmy Hise, senior director of hospitality analytics for CoStar.

Representatives of GEM Realty did not respond to calls seeking comment. Hermann, who owns two upscale properties in Palm Springs — the L’Horizon Resort and Spa and the Colony Palms — also did not return calls from the Union-Tribune.

In an article published last year in the Rancho Santa Fe Review, Hermann left the impression that he hoped to hold onto the Inn at Rancho Santa Fe for a while.

“I really look at purchasing The Inn as being a steward” of its history, he told the publication at the time. “It’s like a great piece of art and my job is to make sure the property is properly restored and renewed so it’s available for future generations.”

Hermann, who in addition to being a developer and hotelier, is also a designer. While he no longer will own the inn, he will continue to work with GEM Capital to complete the renovation, said the public relations firm representing the resort. The hotel remains largely closed while it is being upgraded, although it is open to those with existing reservations. No new reservations are being taken at this time.

“Steve has done an amazing job with the hotel’s renovation and his underlying signature style elements will remain throughout the repositioning and relaunch of The Inn and will continue to be a part of the hotel’s legacy going forward,” said Katie Elicker of The Point PR firm.

In an email sent Tuesday to the Union-Tribune, Elicker described the ongoing project as a “multi-million-dollar” renovation. Two months earlier, it was said to be $50 million. At the time of Hermann’s purchase a year ago, it was disclosed that he secured a $50 million loan for the acquisition and improvements to the property.

Even with the costly renovation, Hermann still stands to make a decent profit of roughly $7 million in a year’s time, although it’s unknown how much of his or his company’s money was invested in the original acquisition and capital improvements, Hise said.

“In general, high-priced hotel transactions like this are very limited, given the current financing environment but big deals like this do happen where institutional buyers who have extra capital to spend will purchase a high-end hotel like this that they think has promise for the future,” she said. “It’s a luxury hotel and the buyer probably sees the upside in the renovations.”

She noted that given what appears to be rising costs for the inn’s makeover, she isn’t surprised that Hermann may have wanted to sell.

“So that’s another reason why we’re not seeing a lot of these big transactions occur because a lot of owners and developers are taking the wait-and-see approach,” she said. “They’re saying, let’s wait until the costs are more favorable, and there’s still talk of a possible recession, so that’s why it’s harder for investors to get deals to pencil out right now.”

Reay suspects that Hermann may have been under financial pressure to sell but it’s hard to know for sure, he said.

“If all we have to go on is that he paid $42.7 million and a press release says he put $50 million into the renovation, you’re probably selling it because you went way, way over budget on your renovation,” Reay speculated.

The Inn at Rancho Santa Fe has a rich history dating to the earlier days of Hollywood when the resort welcomed legendary stars like Bing Crosby and Charlie Chaplin.

Originally built by the Santa Fe Land Improvement Co. — the developers of Rancho Santa Fe — as a guesthouse for clients, the inn was named La Morada when it first opened in 1923. The name later changed to the Inn at Rancho Santa Fe in the early 1940s when it was acquired by its third owner.

Before the hotel was acquired by JMI in 2012, it was last sold in 1958, when Stephen Royce, who had been a pitcher for the New York Giants for just one year, purchased it.