SoCal Hotel Sales Reach New Record

SoCal Hotel Sales Reach New Record

The San Diego Union-Tribune

SoCal Hotel Sales Reach New Record
By Lori Weisberg

In a surprise turnaround, Southern California hotels sales rose sharply during the first half of the year, reversing a downward trend for all of 2016, reported Irvine-based Atlas Hospitality Group.

The mid-year report reveals a record number of transactions for the state as a whole — 206 — and a total dollar volume of $3.2 billion, the second highest on record, according to Atlas.

In Southern California, there were a record 97 transactions, valued at $1.99 billion. That falls short of the previous high of $2.4 billion, set in mid-2015, although it is considerably higher than the $1.1 billion in sales for the first half of 2016, Atlas reported.

“At the end of 2016 we definitely saw a slowdown and we had projected the number of sales would either be down or flat because we thought interest rates would be going up, and we had a new administration, and almost the complete opposite happened,” said Atlas president Alan Reay.

“Sales have continued to climb, and interest rates are still at historic lows for hotel financing.”

Los Angeles County recorded the priciest transaction in the state, with the sale of the 305-room W Hollywood at $219 million. In San Diego, the most expensive sale was the 200-acre Park Hyatt Aviara resort in Carlsbad, which was taken over by its lender in early June for the amount of unpaid debt totaling $186.5 million. Ten years earlier it was valued at $251 million.

In all of San Diego County, there were 17 sales during the first six months, an increase of 70 percent over the same period last year. The value of those transactions was $372.1 million, up 54 percent from last year’s $242.1 million.

The uptick in acquisitions comes as developers have become more bullish about building new hotels, following a years-long period of almost no new construction.

During the first half of last year, there were more than 18,000 rooms under construction up and down the state, a 17 percent increase over the same period in 2016, Atlas reported last month.

Even so, there are only so many new sites available for development, especially in coastal areas, and hotel owners are still able to realize relatively high returns on their properties when they choose to sell, noted Reay.

In San Diego, many of the sales this year have involved more modest, mid-sized or smaller properties, driven in part by hotel companies that have recently sold properties and are needing to reinvest in new hotels in order to defer capital gains taxes, Reay said.

“The year-end survey is more of a true reflection of where we’re headed,” Reay added, “but no question, I think we’ve seen fewer trophy transactions in San Diego, and I’m not aware of larger hotels currently on the market.”

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