California Hotel Property Sales at Record High Values
By Robert Carlsen
California hotel sales reached a record dollar volume of more than $4.4 billion in the first six months of 2015, a 64 percent increase over the same period in 2014, according to Atlas Hospitality Group’s recently completed 2015 Mid-Year California Hotel Sales Survey. This total dollar amount for a six-month period was greater than any annual total in the history of state hotel sales, except for 2006, Atlas added.
Other statewide figures show unprecedented activity and results, including the median sales price per room increasing 25 percent and 13 deals that traded in $100 million-plus range versus four for the same period in 2014. Despite all the increases, the number of individual hotel sales actually declined 7 percent.
The Irvine-based brokerage and research firm said that Northern California increased 83 percent in total dollar volume and Southern California was up 51 percent.
In the first half of 2015, San Francisco City and County saw a 58 percent decrease in sales transactions, but a 120 percent increase in total dollar volume.
“Even though we are seeing fewer sales, we are seeing more expensive transactions and bigger deals trading,” said Alan Reay, president of Atlas. “The main motivation for sellers we are hearing from is that buyers are paying very high prices today and a lot of the sales are already taking into account ‘rosy’ future projections.”
In the same time period, San Francisco’s average price per room increased 127 percent from $215,774 to $489,329 and the median price per room jumped 247 percent from $150,000 to $521,158.
Reay added that in some cases, it is the seller who picked up the hotels at the lower end of the cycle and is taking profit to deploy elsewhere. “Some sellers are trading into secondary markets, where they see more upside over the short term now,” he said.
The largest and most expensive California hotel sale was Hilton’s purchase in February of Wyndham’s 1,024-room Parc 55 Hotel in San Francisco for $530 million.
Reay said San Francisco has come roaring back from the depths of the recession, but has not yet passed the records made in 2006. “A combination of a strong economic recovery, exploding high-tech growth, foreign capital, low cost of borrowing, pent-up demand and, last but not least, little to almost no new hotel development is the perfect storm for record pricing,” he said.
The survey found that individual transactions in Alameda County were down 57 percent, with total dollar volume also decreasing by 36 percent. The average price per room went down 18 percent. The largest and most expensive sale in the county was the $84 million paid for the 482-room Oakland Marriott City Center.
And in Sonoma County, transactions increased 167 percent with total dollar volume up 821 percent, while the average price per room dropped 44 percent. The largest hotel sale in the county was the $28 million paid for the 170-room Hyatt Vineyard Creek in Santa Rosa.