Aliso Viejo-based Sunstone Development LLC has acquired two adjacent hotels next to Disneyland Resort in a potential long-term redevelopment play.
The upstart investment firm paid $20.6 million in two separate deals for the parcels totaling 1.1 acres. It includes the 44-room Days Inn by Wyndham at 1030 W. Ball Road and the 24-room Budget Inn next door at 1042 W. Ball Road.
Sunstone first paid $8.6 million for the former property in a deal that worked out to about $195,500 per key, and in June, records indicate it closed on the Budget Inn, shelling out nearly $500,000 per room for the hotel, among tops on a per-key basis for the city in the wake of the pandemic.
The company—not to be confused with hospitality REIT Sunstone Hotels Investors Inc. (NYSE: SHO), also based in Aliso Viejo—typically invests in hotel and multifamily assets with a separate investment arm specializing in student housing.
The separate sellers were private family offices who had owned their respective hotels for more than a decade each.
The Mogharebi Group represented Sunstone Development.
“Sunstone recognized that together, these properties combined were much more valuable than the sum of its parts,” Otto Ozen, executive vice president at The Mogharebi Group, said in a statement. Ozen and Brian Nakamura advised Sunstone in both transactions.
Sunstone Development was founded in 2021 as a startup investment vehicle from Blake Wettengel and Tanya Muro, the company’s COO.
Wettengel in 2018 founded Versity Investments, which acquires and develops student housing projects across the United States.
Wettengel and Muro previously worked at Nelson Brothers Professional Real Estate, a developer of student housing and assisted living properties.
“We are excited to be Disneyland’s neighbor and a part of Anaheim’s future,” Sunstone Development CEO Wettengel said.
Sunstone entered escrow on the first hotel buy less than one month after the start of the pandemic, which effectively shuttered Anaheim’s tourism market.
Amidst contract negotiations, Sunstone wished to acquire the adjacent property to maximize its land holdings. That seller—the long-term owner of the Budget Inn—had no intention of selling, according to Nakamura.
“At the end of the day, they received an offer they couldn’t refuse,” Nakamura said.
The Anaheim market has since rebounded to ahead of pre-pandemic levels, with 25.5 million visitors to the city in 2022, a 5% increase from 2019, according to Visit Anaheim.
Sources indicate Sunstone Development may redevelop the two properties into a modern hotel project.
The Budget Inn was built in 1959 and the Days Inn was built in 1983.
The hotels are just north of Disneyland, near two of the park’s popular parking structures.
Sunstone’s investment may bode well in the long term, with Disneyland making headway on plans for a large-scale hospitality expansion dubbed DisneylandForward.
“With much needed improvements, ownership will be able to leverage the hotel’s prime location to seize the tremendous upside that exists, especially given the expansion and improvement plans for Disneyland,” Ozen said.
The parcels being eyed by Disney for redevelopment largely include three parking lots and other land totaling about 100 acres.
A theme park expansion on the west side of the property could replace the Downtown Disney and Lilo & Stich parking lots—and join a parcel that currently holds the Disneyland Hotel and Paradise Pier Hotel—while the Toy Story lot on the east side of the property could make way for a mixed-use expansion that would add theme park attractions, hotels, retail and dining.
Sunstone’s new 1.1-acre parcel is located about a half a mile from the Lilo & Stitch parking lot in Disney’s west parcel.
Disneyland is behind the largest hotel currently under construction in Orange County, the 350-room Villas vacation club tower at Disneyland Hotel. The addition, scheduled to open this fall, will bring the hotel’s room count to roughly 1,300.