Orange County hotel sales slowed in 2008 as economic conditions nationwide soured.
In all, there were 15 deals last year, compared to 18 in 2007, a 17% drop. That’s according to preliminary year-end sales data from Irvine-based Atlas Hospitality Group.
Only four of those deals were sealed in the fourth quarter.
The rapid decline in the U.S. economy and corresponding pullback in business travel scared many investors away from hotel deals.
The drop in the number of deals was due to “the difficulty in obtaining financing combined with the fear that we were at the top of the market,” said Alan Reay, president of Atlas Hospitality.
Sales prices for the five largest deals ranged from $112 million to $5.2 million.
Total sales dropped 60% to $198 million compared to $495 million in 2007. The OC data reflects sales of $5 million or more.
Nationwide, hotel sales dropped by 82% in 2008 to $8.2 billion based on transactions of at least $10 million, according to a February report by the New York office of Jones Lang LaSalle Inc.
Notable Sales
Locally, the largest sale last year by dollar amount was the $112 million sale of the 654-room Hyatt Regency Orange County by Ashford Hospitality Trust of Dallas to Inland America Real Estate Trust of Oak Brook, Ill. The deal was structured by the Los Angeles office of Molinaro Koger Inc., a real estate brokerage focused on hotels. It closed in October.
The Hyatt deal helped push the OC median price per room to $100,100, up 4% from $93,159 in 2007.
The Hyatt Regency has undergone $48 million in renovations in recent years.
A distant second by price was the $19.2 million sale of the 110-room Hampton Inn Seal Beach by OTO Development LLC of Spartanburg, S.C., to 2401 Seal Beach LLC, a private investment group. OTO recently stopped building a $22 million Marriott Residence Inn in San Marcos after a construction loan fell through.
Other top deals last year were considerably smaller than in recent years. Most transactions were in the $5 million to $13 million range. None were full-service hotels. They include:
n The 108-room Comfort Inn Anaheim Park, which sold for $12.6 million. The deal was between private individuals.
n The 142-room Hawthorn Suites Orange, which Hawthorn Orange sold for $11 million to private investment group Meridian Inn & Suites LLC of Orange. The hotel, one block south of the Garden Grove (22) Freeway on The City Drive, reopened in February as the Best Western Meridian Inn & Suites after a $4 million renovation that included energy and water conservation programs. Under its new ownership, 123 of the rooms are two-room suites.
n The 104-room Best Value Inn Orange near The Block at Orange. It was sold by Alpha & Omega Development of Palm Desert to Global Hotel Network of San Diego for $10.5 million.
n The 124-room Heritage Inn Fullerton near California State University, Fullerton, also sold for $10.5 million.
n By the Sea Inn, Laguna Beach, was sold by a private owner to Santa Barbara-based Pacifica Hospitality Advisors for $8.1 million. The 36-room motel had the highest sales price per room of all 2008 transactions at $225,000 per room.
n Laguna Beach Senior Living, a former motel that operated as an assisted living center until last year, was sold to Positive Investments of Arcadia for $5.2 million. The new owner reportedly planned to convert it to a bed and breakfast, but the property has remained vacant since fall 2007.
So far this year, there’s just been one deal closed in OC, Reay said.
“I’d expect three or four more before the end of June,” he said.
Statewide
Los Angeles County had the best hotel sales performance in the region in 2008, with total sales cracking the $1 billion mark, up 46% from 2007. Much of that increase was driven by the $366.5 million sale of the Hyatt Regency Century City. The median price per room in Los Angeles also grew by 48% to $123,500.
San Diego County saw its total sales fall 17% to $142 million and its median price per room drop 6% to $93,500. The largest deal in San Diego last year was for the 321-room Courtyard by Marriott Mission Valley, which sold for $43 million.
Riverside and San Bernardino counties suffered the biggest drops in sales. Riverside’s $74 million in 2008 sales was a 78% drop from 2007. Its biggest sale was a $19.8 million deal for the 193-room Hyatt Suites Palm Springs.
In San Bernardino, total sales shrank 74% to $24 million. The largest sale there was a $12.5 million deal for the 148-room Northwoods Resort & Conference Center in Big Bear.
According to the Atlas report, the number of hotel sales in California was down 48% last year compared to a year earlier, along with a 40% drop in sales amount.
