The 372-room San Diego Marriott La Jolla has been sold for nearly $131 million, making it the single largest hotel sale in the county so far this year.
Purchasing the property, in the University Town Center area at 4240 La Jolla Village Drive, was New York-based Carey Watermark Investors 2 Inc., a real estate investment trust that has recently been on a hotel buying spree.
In addition to the Marriott La Jolla, it purchased two other Marriotts this year — in San Jose and the Seattle area — plus an Embassy Suites late last year in downtown Denver. That same year, it also acquired a majority interest in a Ritz Carlton in Miami.
Not only was the sale the highest in San Diego, but it was the third priciest in California, right behind the San Jose Marriott, according to Orange County-based Atlas Hospitality. The $130.9 million sales price was not disclosed by the buyer but is based on the deed recorded by the San Diego County Recorder’s office.
The La Jolla hotel last changed hands in 2011 when the most recent owner, HEI Hotels and Resorts, purchased it for $71 million and subsequently undertook an ambitious renovation of all the guestrooms. While HEI declined to disclose how much it spent, the company said at the time of the 2011 purchase that it expected to invest about $20 million in the project, which also included reconfiguring the lobby and updating its dining venues.
“When we acquired the asset, we did a substantial renovation so (the sale) might not be as big a windfall as the records would show,” said Steen Petri, senior vice president of investments for HEI Hotels and Resorts. “Our whole business is to buy hotels and create value through renovation and better operation, and that’s exactly what we did here.
“As far as timing on the sale, we typically hold hotels for three to five years before we sell, so this is our typical M.O.”
HEI will continue to manage the hotel, which opened in 1985, Petri added.
Carey Watermark, which expects to renovate the hotel’s meeting space in the next 18 to 24 months, was attracted to the San Diego market because of the continued strength of the still-improving hotel industry here, said CEO Michael Medzigian.
“Also, the property’s location in the University Towne Centre and the surrounding 4 million square feet of Class A office space, together with its direct access via sky bridge to the Westfield UTC mall, are demand generators for the hotel,” he added. “Finally, we feel the high barriers to entry and limited available sites for new hotel development in La Jolla will support the longer-term value of the property.”
While sales activity in California dropped off significantly in the first quarter of this year, the market is returning to a normal pace, said Atlas Hospitality CEO Alan Reay.
“A lot of people thought 2015 was the peak in the hotel market, but we’re seeing good numbers being put up by these hotels,” he said. “Also, the Marriott in La Jolla is a very difficult deal to replicate and you’ll always have buyers for that kind of an asset.”
— Lori Weisberg is a writer for The San Diego Union-Tribune