Visitors are back in Anaheim, Orange County’s hub for tourism.
So are investors.
A trio of Anaheim hotels have just traded in separate deals totaling north of $120 million, the Business Journal has learned.
In the largest deal of the three, the recently completed Element Anaheim Resort Convention Center sold for $64.7 million. The purchase marks the second largest hotel sale in the county since the onset of the pandemic in March 2020, and the priciest in OC in 2021 to date.
At nearly $372,000 per room, the sale also sets a new price-per-room record for the city of Anaheim, notes Atlas Hospitality Group founder Alan Reay.
It also marks the latest local sign of strength for the local hospitality investment sector, which had been largely stalled amid low consumer confidence and travel demand in the wake of the pandemic, according to Reay, whose Irvine-based firm acts as a brokerage and consultant for hotel sales.
“There’s a tremendous amount of buyer interest in California, particularly for new product in what buyers perceive to be strong markets,” Reay said.
Utah-based investor Dynamic City Capital (DCC) bought the Element Anaheim Resort, a 174-room hotel at 1600 S. Clementine Street. The hotel, next to the Santa Ana (5) Freeway and a short walk to Disneyland, is scheduled to open next month.
One buyer is behind the other two Anaheim deals: New York-based Monarch Alternative Capital.
Both investors are new to the Orange County market.
“There was a tremendous amount of capital raised last year on the anticipation that there would be a huge wave of foreclosures in the market, and that just didn’t happen,” Reay said.
“The only word I can use to describe what’s happening in the market is ‘incredible.’”
Per Room Record
Newport Beach-based investment firm PINN Investments sold the Element hotel in the all-cash transaction.
The five-story hotel wrapped construction earlier this year. The Westin-branded property includes 174 suites.
The prior record sale on a per-room basis in Anaheim occurred two years ago, when the 214-room Homewood Suites by Hilton Anaheim Resort Convention Center sold for about $340,000 per room, or $36.6 million.
“The prices being paid today are way higher than what people expected, even pre-COVID-19,” Reay said.
The Element sale is DCC’s third hotel acquisition this year, following the purchase of two Hilton-branded hotels in San Diego.
2020 was “a historically difficult year in our industry. The fact we are seeing portfolio growth the first six months of this year speaks to our teams’ performance and the trust and confidence of our investors,” said Joel Sybrowsky, DCC’s co-managing partner.
Eagle Deals
While the Element sale involved a new property that wasn’t facing financial difficulties, the two other Anaheim sales were—they traded as part of a Chapter 11 bankruptcy filing involving Singapore-based owner Eagle Hospitality Trust.
At the start of the year, the hospitality real estate investment trust began the process to sell its U.S. portfolio of 15 hotels to recoup losses largely caused by the pandemic.
The recently traded assets include the 255-room Holiday Inn Hotel & Suites Anaheim and the 223-room Embassy Suites by Hilton Anaheim North.
Monarch Alternative Capital has emerged as the buyer, with a deal to buy most of Eagle’s assets for nearly $500 million.
The deal excludes the Queen Mary in Long Beach, which was taken over by the city at the start of the month, news reports indicate.
Monarch closed on the larger Embassy Suites hotel for $33.1 million, or about $148,000 per room, according to property records.
A price has not been disclosed for the 255-room Holiday Inn Hotel, though sources indicate the property is likely to trade for between $25 million and $30 million.
That works out to $98,000 to $118,000 per room.
Top State Sale
The $64.7 million sale of the Element is the largest local hotel transaction since last November, when the Newport Beach Marriott Hotel & Spa near Fashion Island sold for $216 million.
The Newport Beach deal was the largest hotel transaction in 2020 in the state, and works out to about $406,000 per key.
Eagle Four Partners, a Newport Beach-based investor with several other hospitality properties nearby (and not related to Eagle Hospitality) is the new owner of the 532-room property—Orange County’s ninth-largest hotel by room count—which sits on the western edge of Newport Center, just off Santa Barbara Drive.
Eagle Four partnered with Newport Beach’s Lyon Living, the apartment investor and developer founded by the late Gen. William Lyon, to buy the hotel from Bethesda, Md.-based Host Hotels & Resorts Inc. (NYSE: HST).
Other investors, including Irvine’s Landspire Group, were also involved in the buy of the Newport Beach Marriott, which is expected to see a revamp and possible redevelopment by the new ownership group.
Expect pricier deals to follow in OC, with investor demand growing each day, Reay said.
“I didn’t initially buy into the V-shaped recovery theory for the industry following COVID-19, but this market is like none I’ve ever seen.”
