Excerpt from CoStar
Portfolio sales, upscale hotels and capital-raising deals have pushed California hotel sales and total dollar volume to new highs in 2021.
By any measure, 2021 has been a banner year for hotel deals in California.
The 2021 Year-End California Hotel Sales Survey reports that there were 510 hotel deals for the year, up 71% from 2020 and above the record high. 2014 of 399 offers. Total dollar volume was $9.93 billion, a 204% increase over last year and more than the 2015 record high of $9.5 billion. At $265 million, the Montage Healdsburg was the most expensive deal in the state.
The state also set new record prices per key. The median price per key reached $137,877, a 23% increase from 2020 and higher than the previous high of $121,907 in 2019. Thirteen deals included a price of $1 million per key, another record , and that includes the Alila Ventana Big Sur twice because it sold twice in the year for over $2.5 million each time. Three other hotels also sold for more than $2 million per key, another record.
Looking at company records, Atlas Chairman Alan Reay said California has never sold more than 400 hotels before, but in 2021 they topped 500. The state has typically average transaction volume in the low to mid-$300s. In terms of total dollar volume, hotel sales are typically around $5 billion in total.
The state saw a number of high-priced bids, including Montage Healdsburg; the La Quinta Resort & Club, Curio Collection by Hilton; the Alila Ventana; the Luxe Rodeo Drive hotel in Beverly Hills; and the Four Seasons Resort and Residence Napa Valley, which helped boost dollar volumes and prices per key, but many of the transactions that increased total sales were for smaller properties.
One of the main factors driving up total transactions was portfolio sales, namely the sale of Extended Stay America and its stapled real estate investment trust, ESH Hospitality, as well as CorePoint Lodging, did he declare. The Extended Stay America deal included more than 500 hotels across the United States, and many of them were in California.
The Extended Stay America deal with Blackstone and Starwood Capital was struck because extended stay hotels are a highly desirable commodity, not only from a new construction perspective, but also from a resale perspective, a- he declared. Overall, labor costs go up and the extended stay product doesn’t have the same labor requirements, especially when people stay longer.
“These assets are trading at really high prices per room,” he said. “It’s been a pretty quick shift from people who have owned them for a long time to people who have opened them for the past few years, where they look at what they thought they could trade and then sell today because they’re sell at such a price. great premium over what they signed these projects for when they first built them.
Blackstone selling Motel 6 pools also accounted for a large portion of transactions recorded in 2021, he added.
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