Orange County hotel investors have been in a selling mood of late in the La Jolla area of San Diego, with a pair of transactions at the upscale town this month bringing in a total of $334 million.
In the larger of the two deals, Irvine’s Sunstone Hotel Investors (NYSE: SHO) sold the 340-room Embassy Suites La Jolla for $226.7 million, or about $667,000 a key.
It’s the biggest hotel sale in San Diego this year, according to reports.
The buyer for the 12-story property, located a couple miles from the ocean along La Jolla Village Drive, was not immediately disclosed. The sale represents a 4% cap rate on 2019 net operating income for the hotel, according to the Irvine real estate investment trust, which is valued at around $2.5 billion.
Sunstone bought the Embassy Suites in 2006 for about $100 million. Another $17 million was invested into the property since then, according to Sunstone’s latest annual report. It was one of just three hotels it operated that remained open over the entire course of 2020, it said.
The property is close to a good portion of Irvine Co.’s office portfolio in La Jolla, which is the region’s main biotech hub.
Sunstone’s remaining property in San Diego is the Hilton San Diego Bayfront, which has 1,190 rooms and is the largest hotel by room count in the REIT’s portfolio. It sold off its only OC properties a couple years ago, and now has 17 hotels in its portfolio.
A portion of the proceeds from the La Jolla sale went to Sunstone’s most recent acquisition, the newly built Four Seasons Resort Napa Valley.
The company paid $177.5 million for the 85-room Four Seasons Napa, which counts nearly 4.5 acres of vineyards and the Elusa Winery, along with the inventory of prior wine vintages.
For more on Sunstone’s two recent buys in Napa Valley, see the Nov. 8 print edition of the Business Journal.
Pacific Hospitality Sale
Also in La Jolla, Irvine’s Pacific Hospitality Group sold the 210-room Estancia La Jolla Hotel & Spa for $108 million, or a little more than $514,000 a key.
Maryland-based hospitality REIT Pebblebrook Hotel Trust (NYSE: PEB) was the buyer of the property, located on 10 acres. The Estancia is a short walk from the ocean, and next to the University of California, San Diego.
Pacific Hospitality, led by Tim Busch, paid a reported $41.7 million for the hotel a decade ago.
The Irvine investor now has about a dozen properties in its portfolio, including several hotels in OC.Â
