Hotel sales in Orange County bucked the statewide trend in the first half of the year, falling short of record deals a year ago.
Fifteen hotels changed hands in the county during the first six months of the year, down from 19 a year ago, according to a survey by Costa Mesa-based Atlas Hospitality Group.
Statewide, the number of hotel sales jumped 16% to 177 during the first half of the year.
A healthy real estate sector, low interest rates, scarce land and high construction costs are expected to generate strong sales activity well into next year.
Atlas said that as many as 350 hotels may change hands in the state this year. The sales volume is expected to be a record $3 billion, the report said.
OC neighbors San Diego and Riverside counties saw sales rise by 23% and 64%, respectively.
Atlas president Alan Reay attributed the drop in OC activity to a tough comparison with record sales in the first half of 2004.
Still, OC’s sales packed a punch. The median price per room of hotels sold jumped 40% to $85,720. The statewide median sale price was $75,000 per room.
San Diego posted the highest median price per room in Southern California at $96,591. Statewide honors in that category went to Sonoma County, where the median price per room was $108,021.
Reay said he wouldn’t be surprised to see the OC sales pace pick up, though owners of larger hotels are likely to be picky.
“The tendency in Orange County is that owners believe there’s more room for revenue and value growth and they’re not anxious to sell,” he said.
Reay said recent increases in the cost of construction materials could end up bolstering sales.
“It makes existing hotels look more attractive,” he said.
The largest sale in OC in the first half of the year was the 230-room Hilton Suites Anaheim.
The business hotel was sold by Beverly Hills-based Hilton Hotels Corp. to RLJ Urban Lodging Fund LP, an affiliate of RLJ Development LLC in Bethesda, Md. The Hilton Suites traded hands as part of a three-hotel sale for $72 million.
The Hilton Suites accounted for an estimated $23 million of that sale, which also included hotels in Beachwood, Ohio, and Phoenix. RLJ also owns the Residence Inn in Garden Grove.
The second-biggest OC sale was Anaheim’s 195-room Penny Sleeper Inn, which went for $10 million to Praful Patel in April. The hotel was renamed the Quality Inn & Suites Anaheim.
The county’s third largest sale this year also was near a theme park. Buena Park’s 177-room Best Western Inn Suites Hotel, less than a mile from Knott’s Berry Farm, sold for $8.6 million in February to PR Properties LP.
Other OC hotel sales included:
The 142-room Hawthorn Suites Orange on City Drive, which brought in $7.5 million.
The 60-room Comfort Suites Lake Forest East Irvine, which sold for $6.4 million in June.
The Carriage Inn, a 66-room hotel in Anaheim, which sold in May for $6.2 million, or $93,939 per room.
An 84-room Hampton Inn South Orange County at Foothill Ranch.
The 264-room Holiday Inn Anaheim Resort Area and neighboring 143-suite Staybridge Suites, which sold to Newton, Mass.-based Hospitality Properties Trust in February.
In all, there were 110 hotel sales in Southern California in the first half of the year, up from 107 in 2004. Total deal volume jumped to $1.3 billion, compared to $817 million a year ago.
The median sales price for the region was $2.6 million. OC’s median hotel sale price was up 9% to $5 million from a year ago.
Los Angeles saw 41 hotels change hands, the same as in 2004. But the county had the two biggest sales by price tag.
The Marriott Los Angeles Airport sold for $136 million in June and the St. Regis Hotel Century City sold for $123 million in January. The St. Regis is being converted to condominiums.
L.A. already has posted a larger sale since mid-year.
In October, San Clemente-based Sunstone Hotel Investors Inc. bought the Westin Century Plaza for $293 million and renamed it the Hyatt Regency Century City. Renovations are under way.
Riverside saw 23 hotels trade hands this year compared to 14 a year earlier. San Diego also posted an increase with 16 sales compared to last year’s 13.
San Bernardino saw its sales pace slow to five hotels compared to eight a year ago.
A sign that the sales pace could remain brisk was Host Marriott Corp.’s announcement last week that it planned to buy 38 hotels for $4 billion from Starwood Hotels & Resorts Worldwide Inc.
Five of those hotels, including the Westin South Coast Plaza in Costa Mesa, are in Southern California. The deal is expected to close early next year.
Host Marriott Vice President Kevin Jacobs said the company didn’t immediately expect to change the names at any of the Southland hotels.
The market should continue to be strong next year, said Bruce Baltin, senior vice president at the Los Angeles office of PKF Consulting, which follows hospitality trends.
“The market as a whole is rated highly (for investments),” he said. “Hotel prices are at a peak and buyers still see value in them compared to other investments.”
