US$170M Sale of Park Hyatt Aviara was Largest Hotel Sale in Southern California in 2018

Main Photo: The Park Hyatt Aviara Resort Golf Club & Spa

Date: February 2019

Location: San Diego, California, USA

Name: The Park Hyatt Aviara – five star

No. of Keys: 327 rooms and suites

Seller: Originally owned by Broadreach Capital in 2006, who were unable to keep up payments, relinquished the hotel to it’s lender – CW Capital. However Broadreach still have The Carlyle NY, the Park Hyatt Sydney, The Biltmore Santa Barbara and were helpful in getting Rosewood off the ground, as well a bunch of office buildings across the USA.

The Broadreach venture in 2010 had re-branded the property a Park Hyatt and brought in Dolce Hotels and Resorts to replace Four Seasons Hotels as its manager. An appraisal at the time valued the property at $124.4 million.

Buyer: Xenia Hotels & Resorts, headed up by Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. Hyatt manages eight other assets owned by Xenia, including Hyatt Centric Key West Resort & Spa, Hyatt Regency Santa Clara, Andaz San Diego, Andaz Savannah, Andaz Napa, Hyatt Regency Grand Cypress, Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch, and Royal Palms Resort & Spa.

The Company owns 41 hotels comprising 11,566 rooms, across 17 states and the District of Columbia. Xenia’s hotels are primarily in the luxury and upper upscale segments, and operated and/or licensed by brands such as Marriott, Hyatt, IHG’s Kimpton, Accor’s Fairmont, Hilton and Loews, as well as independent management companies including Sage Hospitality, The Kessler Collection, Urgo Hotels & Resorts, and Davidson Hotels & Resorts.

California hotel sales declined sharply last year, but San Diego still earned bragging rights as having the most expensive sale in Southern California.

The $170 million sale last November of the Park Hyatt Aviara catapulted the county into first place for the highest individual hotel transaction, but the $575 million sale of the 681-room Park Central in San Francisco was No.1 in California, according to a year-end report prepared by the Atlas Hospitality Group.

Statewide, the total number of individual transactions last year – 280, represented a more than 24 percent drop compared to 2017. It was also the third lowest volume of sales over the last decade, Atlas reported.

Similarly, the total dollar volume — $5.6 billion — also fell, posting a decline of nearly 10 percent. Still, in a sign that hotel values may be rising for at least some properties, the median price per room paid by buyers — $121,439 — hit a new record high. Cavallo Point, a lodge in Sausalito that sits at the foot of the Golden Gate Bridge on San Francisco Bay, and the 10-room Mansion on Sutter in San Francisco both sold for more than $1 million per room in 2018.

The $5.6 billion in sales for California fell far short of the 2015 peak of $9.5 billion.

San Diego County saw similar drops in both the quantity and dollar volume of sales, with the latter falling more than 31 percent to $420.7 million.

Atlas CEO Alan Reay offered a number of explanations for the fall off, including rising interest rates, increased labor costs that in turn will dampen net operating income, a pullback in investment from China, and stricter underwriting standards from lenders.

Probably the biggest factor, though, is the widening gap between the prices that buyers are demanding and what sellers are willing to pay.

All these forces will likely be at work this year as well, which will contribute to a continued slowdown in sales and a flattening of prices, according to Reay.

“The last time we saw this kind of a drop was from 2008 to 2009, when there was a 50 percent decline in sales transactions,” Reay said. “It was because people in 2009 were trying to get the kind of prices achieved in 2008, and buyers weren’t going to pay that. So in 2018, we had a lot of sellers who wanted prices that they saw in 2017 even though interest rates and labour costs were going up and revenues per available room were starting to flatten.

“Whereas buyers in 2017 and 2016 were anticipating growth in revenues and profits, very few buyers are projecting that today.”

San Diego hotel owner and operator Robert Rauch would agree. More specifically, he said it’s the high prices that sellers are demanding that have dissuaded him from making any purchases.

Price: US$170m

Price per Key: US$519,878

THPT Comment: “Sellers are holding onto their assets because they think the market still has a little bit of life in the economy and are not willing to discount their property,” said Rauch, who has not purchased any hotels in the last couple of years.

First Seen: Hotel Online

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