Hospitality Lawyer on California Hotel Transactions from Atlas Hosp at JMBM's Meet the Money

8/14/2019 Hospitality Lawyer on California Hotel Transactions from Atlas Hosp at JMBM's Meet the Money

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JMBM Meet the Money 2008JMBM Meet the Money 2008The California Hotel Market:The California Hotel Market:

A Transactional View of Hotel ValuesA Transactional View of Hotel Values

Presented ByPresented By

Tim L. EdgarTim L. EdgarAtlas Hospitality GroupAtlas Hospitality Group

Copyright 2008Copyright 2008 Atlas Hospitality Group Atlas Hospitality Group


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Review of Last Year'sReview of Last Year's

ForecastForecast Prediction:Prediction: 2007 is on pace to surpass the record number of hotels sold in2007 is on pace to surpass the record number of hotels sold in

2006.2006. Result:Result: Sales declined 12%, while sales volume was down 32%.Sales declined 12%, while sales volume was down 32%.

Prediction:Prediction: Expect to see strong price appreciation in Northern California,Expect to see strong price appreciation in Northern California,especially the Bay Area.especially the Bay Area.

Result:Result: Median price per room in San Francisco County was up 50%Median price per room in San Francisco County was up 50%($154,000 vs. $102,000).($154,000 vs. $102,000).


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Review (continued)Review (continued)

Prediction:Prediction: The number of new hotels under construction and in planning willThe number of new hotels under construction and in planning willhave a dampening effect on 2008 volume.have a dampening effect on 2008 volume.

Result:Result: Sales were down over 40% in the first quarter of 2008; there was aSales were down over 40% in the first quarter of 2008; there was a24% increase in the number of hotel rooms under construction and a 74%24% increase in the number of hotel rooms under construction and a 74%increase in the number of rooms opened.increase in the number of rooms opened.

Prediction:Prediction: The number of hotels for sale will increase.The number of hotels for sale will increase. Result:Result: Mid-year 2007 saw a 10% increase in the number of hotels availableMid-year 2007 saw a 10% increase in the number of hotels available

for sale; this had increased to 15% by the end of the year.for sale; this had increased to 15% by the end of the year.


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California Sales OverviewCalifornia Sales Overview

2003 2004 2005 2006 2007

Transactions 267 320 367 390 343

$ Volume $1.8B $2.2B $4.5B $5.1B $3.5B

Median/Room $50,772 $60,000 $71,631 $77,273 $91,507

% Increase 18% 19% 8% 18%

Sales > $5M 77 119 141 179 175% Total 29% 37% 38% 46% 51%


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Development SummaryDevelopment Summary

2003 2004 2005 2006 2007

Hotels Opened 57 45 36 29 52

# Rooms 8,236 5,725 3,839 3,265 5,668


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Summary of 2007 SalesSummary of 2007 Sales

SurveySurvey After reaching unprecedented heights in 2005 and 2006, 2007 saw theAfter reaching unprecedented heights in 2005 and 2006, 2007 saw the

California market level off. The states sales volume was $3.5 billion, aCalifornia market level off. The states sales volume was $3.5 billion, a32% decrease from 2006s record-breaking $5.1 billion. Individual32% decrease from 2006s record-breaking $5.1 billion. Individualtransactions were down 12%.transactions were down 12%.

There were some bright spots in 2007, including the 18% increase inThere were some bright spots in 2007, including the 18% increase inthe median price per room sold in California. The average price perthe median price per room sold in California. The average price perroom also rose, up 9%.room also rose, up 9%.

Individual transactions in Southern California were down 19%, but theIndividual transactions in Southern California were down 19%, but themedian price per room increased 17%. Northern California had a 4%median price per room increased 17%. Northern California had a 4%drop in transactions, but a 26% increase in the median price per room.drop in transactions, but a 26% increase in the median price per room.


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SouthernSouthern

CaliforniaCalifornia


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os Angeles Countyos Angeles County

Los Angeles County saw a 27% decrease in the number of individual hotelLos Angeles County saw a 27% decrease in the number of individual hotelsales from 2006 to 2007.sales from 2006 to 2007.

The total dollar volume of reported sales dropped 34% to $735 million.The total dollar volume of reported sales dropped 34% to $735 million. The countys median price per room increased slightly, up 2%.The countys median price per room increased slightly, up 2%. The largest sale in Los Angeles County, based on the number of rooms,The largest sale in Los Angeles County, based on the number of rooms,

was the 582-room Radisson Hotel at Los Angeles Airport (LAX). The highestwas the 582-room Radisson Hotel at Los Angeles Airport (LAX). The highestreported sale was the $122 million paid for the 436-room Sheraton Universalreported sale was the $122 million paid for the 436-room Sheraton UniversalHotel in Universal City.Hotel in Universal City.

The county had a 3.5% sales turnover.The county had a 3.5% sales turnover.

Radisson atRadisson at

LAXLAX


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Orange CountyOrange County

Individual transactions in Orange County decreased 21% in 2007.Individual transactions in Orange County decreased 21% in 2007.

Total sales volume also dropped, down 29% to $539 million.Total sales volume also dropped, down 29% to $539 million.

The median price per room rose 2%.The median price per room rose 2%.

The largest and most expensive hotel sold in Orange County wasThe largest and most expensive hotel sold in Orange County was

the $200 million sale of the 1,572-room Hilton Anaheim. Danathe $200 million sale of the 1,572-room Hilton Anaheim. DanaPoints 376-room Laguna Cliffs Marriott Resort & Spa was closePoints 376-room Laguna Cliffs Marriott Resort & Spa was close

behind at $194 million.behind at $194 million.


Hilton AnaheimHilton Anaheim


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Riverside CountyRiverside County

Riverside County experienced a 17% increase in transactions.Riverside County experienced a 17% increase in transactions. Total dollar volume rose 154% to $329 million.Total dollar volume rose 154% to $329 million. The median price per room was up almost 30%.The median price per room was up almost 30%. The largest and most expensive sale came from the $137 million paid forThe largest and most expensive sale came from the $137 million paid for

the 560-room Renaissance Esmeralda Resort and Spa in Indian Wells.the 560-room Renaissance Esmeralda Resort and Spa in Indian Wells.


Renaissance EsmeraldaRenaissance EsmeraldaResortResort


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San Bernardino CountySan Bernardino County

San Bernardino County had a small 5% drop in transactions.San Bernardino County had a small 5% drop in transactions.

Total dollar volume dropped 50% to $92 million.Total dollar volume dropped 50% to $92 million.

The median price per room stayed about the same.The median price per room stayed about the same.

The largest and most expensive sale in San Bernardino CountyThe largest and most expensive sale in San Bernardino County

was the $16.8 million paid for the 104-room Hampton Inn & Suiteswas the $16.8 million paid for the 104-room Hampton Inn & Suitesin Chino Hills.in Chino Hills.


Hampton Inn & Suites ChinoHampton Inn & Suites ChinoHillsHills


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NorthernNorthernCaliforniaCalifornia


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an Francisco Countyan Francisco County

San Francisco County had a 37% drop in individual transactions in 2007.San Francisco County had a 37% drop in individual transactions in 2007. Total dollar volume decreased 63% to $470 million.Total dollar volume decreased 63% to $470 million. The countys median price per room rose 50%.The countys median price per room rose 50%. The largest and most expensive sale was the 803-room Hyatt Regency SanThe largest and most expensive sale was the 803-room Hyatt Regency San

Francisco at $210 million.Francisco at $210 million. The county had a 3.9% sales turnover.The county had a 3.9% sales turnover.

Hyatt Regency SanHyatt Regency SanFranciscoFrancisco


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Alameda CountyAlameda County

Alameda County had an 80% increase in transactions.Alameda County had an 80% increase in transactions. Total dollar volume went up 620% to $169 million.Total dollar volume went up 620% to $169 million. The median price per room stayed about the same.The median price per room stayed about the same. The largest and most expensive sale came from the 484-room OaklandThe largest and most expensive sale came from the 484-room Oakland

Marriott City Center at $49.5 million. The runner-up was the $25 million paidMarriott City Center at $49.5 million. The runner-up was the $25 million paid

for the 357-room Fremont Marriott Silicon Valley.for the 357-room Fremont Marriott Silicon Valley. The county had a 8.0% sales turnover.The county had a 8.0% sales turnover.

Oakland Marriott CityOakland Marriott CityCenterCenter


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Santa Clara CountySanta Clara County

Transactions in Santa Clara County remained flat in 2007.Transactions in Santa Clara County remained flat in 2007. Total dollar volume dropped 6% to $115 million.Total dollar volume dropped 6% to $115 million. The median price per room increased 5%.The median price per room increased 5%. The largest sale was the 257-room Embassy Suites in Santa Clara, part ofThe largest sale was the 257-room Embassy Suites in Santa Clara, part of

the same portfolio as the Hilton La Jolla Torrey Pines in San Diego County.the same portfolio as the Hilton La Jolla Torrey Pines in San Diego County.

The most expensive sale was the 224-room Cypress Hotel in Cupertino atThe most expensive sale was the 224-room Cypress Hotel in Cupertino at$54 million.$54 million.


CypressCypressHotelHotel


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San Mateo CountySan Mateo County San Mateo County had a 27% decrease in transactions.San Mateo County had a 27% decrease in transactions. Total dollar volume dropped 30% to $38 million.Total dollar volume dropped 30% to $38 million. The countys median price per room stayed about the same.The countys median price per room stayed about the same. The largest sale was the 309-room Crowne Plaza Hotel San FranciscoThe largest sale was the 309-room Crowne Plaza Hotel San Francisco

International Airport (SFO) in Burlingame. The highest reported sale was theInternational Airport (SFO) in Burlingame. The highest reported sale was the

former 110-room Quality Inn in San Mateo at $8.9 million.former 110-room Quality Inn in San Mateo at $8.9 million. The county had a 5.8% sales turnover.The county had a 5.8% sales turnover.

Crowne PlazaCrowne Plaza

SFOSFO


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ForecastForecast

We predict that the total number of 2008 transactions will be down by overWe predict that the total number of 2008 transactions will be down by over30% from 2007. This equates to about 250 individual sales, one of the30% from 2007. This equates to about 250 individual sales, one of thelowest figures seen in over 10 years of reporting.lowest figures seen in over 10 years of reporting.

We expect total dollar volume to decline by over 30%, which would put 2008We expect total dollar volume to decline by over 30%, which would put 2008at around $2.5 billion, almost 50% below the peak in 2006.at around $2.5 billion, almost 50% below the peak in 2006.

A number of factors will continue to negatively impact sales activity,A number of factors will continue to negatively impact sales activity,including difficulty in obtaining financing at favorable rates and terms; Revincluding difficulty in obtaining financing at favorable rates and terms; RevPAR growth slowing and, in some areas, declining and; disconnect betweenPAR growth slowing and, in some areas, declining and; disconnect betweenbuyers and sellers on price expectations.buyers and sellers on price expectations.

We feel that sales will continue to be slow through 2008 and at least throughWe feel that sales will continue to be slow through 2008 and at least throughmid-2009.mid-2009.

Hospitality Lawyer on California Hotel Transactions from Atlas Hosp at JMBM's Meet the Money

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