• News
  • Real Estate

Few hotel sales, plenty of renovation

Although there were few major acquisitions by lodging real estate investment trusts in the first quarter, plenty of renovation work has been going on around the county at large and small hotels.

Alan Reay, Atlas Hospitality Group president, said any hotel owners who have failed to upgrade their properties within the past three to five years are risking their flag and the viability of the hotels themselves.

"They can undergo a franchise death spiral," Reay said. "They get weaker and weaker affiliations. This is happening a lot with 40-year-old properties, where it makes more sense to scrap them and redevelop."

Bethesda, Md.-based RLJ Lodging Trust (NYSE: RLJ) paid $312.5 million in March for 10 properties including $36 million for the 193-room Hyatt House hotel in Sorrento Mesa. The property, which has gone through multiple brands and upgrades, was originally known as a Woodfin Suites Hotel.

Also in March, the 112-room Residence Inn by Marriott at 1245 Los Vallecitos Blvd., in San Marcos sold for $15.15 million as part of a 15-property nationwide acquisition sale by partnerships controlled by The Blackstone Group (NYSE: BX).

Although the overall price of the 15-property transaction wasn't revealed, New York-based Blackstone, which is known to spend millions of dollars upgrading its properties, took out $204 million in financing from J.P. Morgan Chase (NYSE: JPM) when it bought the 15 assets.

The Residence Inn was built on 2.26 acres. A complete renovation of the hotel was completed in July 2010.

While Blackstone owns many varied assets, the local jewel in its crown is the Hotel del Coronado, of which it has a more than 60 percent stake.

The 757-room Hotel Del has continued to evolve with new construction. The hotel recently completed a $13 million renovation.

The just-completed work upgraded the historic hotel's lobby and upgraded its Ocean Tower guestrooms — including two new family suites including a newly-renovated master king bedroom and sitting parlor — along with an ocean-inspired children's bedroom with an under-the-sea theme.

The furniture includes bunk beds (single on top, double on bottom with a trundle), bean bag chairs, a toy chest and a large-screen television with a X-Box system.

Hotel Del spokeswoman Gina Petrone said outdoor seating areas are being expanded, more fire pits are in the works, and the Shearwater Breakfast Buffet will be expanded.

Blackstone and Strategic Hotels & Resorts, (Strategic owns a 36.4 percent stake in the Hotel Del), refinanced the property for $475 million in March of last year. The paper on the hotel is due to mature in March 2018.

As for its other properties, Strategic Hotels added that it also has about $89.3 million remaining on a loan secured by the Hyatt Regency La Jolla. That 4.5 percent loan is due to mature in December 2017.

Maryland-based Pebblebrook Hotel Trust (NYSE: PEB), which paid $112.5 million for the 337-room Embassy Suites San Diego Bay hotel in downtown San Diego in January of last year, plans to renovate the lobby and atrium, and add three guestrooms.

Aliso Viejo-based Sunstone Hotel Investors (NYSE: SHO), which paid $475 million for the 1,200-room Hilton San Diego Bayfront in the spring of 2011, is spending about $4 million to upgrade the hotel's guest rooms and common areas.

For those who are willing to upgrade the hotels, Reay noted it isn't only the properties and the owners who benefit, but also contractors.

"Whichever companies are specializing in hotel renovations stand to fare very well," Reay said.

User Response
0 UserComments

Hotel del Coronado

Company Website

1500 Orange Ave.
Coronado, CA 92118

Hotel del Coronado Executive(s):

Donna Gonser

  • Manager

Bob Antes

  • Chief Financial Officer

Barry Brown

  • Director of Sales

Andre Zotoff

  • General Manager, Vice President