Fewer North Bay hotel rooms sell in H1 2022

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Sales of hotel properties in California continue to be strong in the first half of the year, although they have cooled compared to the first half of 2021, with most of the activity in the North Bay centered on the Sonoma County, according to a company that tracks hotel sales.

While the number of North Bay hotel sales in the first half of the report – 18 – was unchanged from a year earlier, the number of rooms in rated deals fell nearly 12%, at 867 versus 981, according to Atlas Hospitality Group recently released a survey of California hotel sales for mid-2022.

Eleven of North Bay’s transactions were in Sonoma County; three were in Solano County and two were in Napa and Marin counties.

Alan X. Reay, president of Atlas Hospitality Group, a Newport Beach-based commercial real estate company specializing in the sale of California hotels, said there have historically been more hotel properties available for sale in Sonoma County. than in Napa, Marin and Solano counties. .

The biggest North Bay deal on the report was the 58-room Dawn Ranch Lodge in Guerneville. It sold for $20.3 million, the equivalent of $350,000 per piece.

The sale of the Silverado Resort & Spa in Napa Valley on February 2 is not mentioned in the report. Pricing was not disclosed, but the Napa Valley Register reported the deal’s value to be $62.4 million, according to county records. That would come out to $138,975 per room.

The median selling price per room statewide in the first half was $143,443, according to Atlas.

The May sale of the Fairmont Sonoma Mission Inn & Spa, which was one of 25 hotels in 14 states acquired by a real estate investment trust for $3.8 billion, was also not included in the report. Individual pricing for the Sonoma Hotel was not available. A three-quarter stake in the 226-room hotel was sold in 2013 for $73 million.

So if the 449 and 226 rooms in the Silverado and Sonoma Mission Inn offerings, respectively, were included, the number of rooms sold — 1,542 — would be up 57% from the first half of 2021.

After the Dawn Ranch deal, the Atlas Report said the next highest sale in North Bay was the Motel 6 property in Rohnert Park, at $14.5 million. Three other Motel 6 properties sold for a slightly lower price, at $14.2 million, $14.1 million, and $13.5 million, in Santa Rosa South, Santa Rosa North, and Petaluma, respectively.

The second-lowest price was for a Travelodge location in Fairfield, which sold for $7.3 million.

And the cheapest transaction in North Bay was $849,000 for George’s Hideaway in Guerneville, which closed.

The total value of North Bay hotel transactions in the first half fell 70% from a year earlier to $131.2 million, according to the company’s report. Adding the sale of the Silverado Resort to the mix, transaction volume would be down 56% from the first half of last year.

Atlas Hospitality said in the report that “although sales cooled somewhat during the first half of 2022 compared to the record pace set during the same period last year, they still registered as the second most largest number of recorded sales and the third highest in terms of dollar volume.

However, the company expects hotel sales to decline sharply in the second half due to the rising cost of debt, uncertainty about the economy and the possibility of a recession.

Hotel sales down nationwide

In terms of hotel sales for 2020, the first year of the pandemic, transactions in the United States were down 53%, he said.

For example, hotel sales in New York, Texas and Florida fell 62%, 54% and 48% respectively in 2020.

Transactions were steady in California as approximately 84 hotels were sold to Project Roomkey, the federally funded homeless relief initiative that ran from April 2020 through the end of the year. Otherwise, hotel sales in the state would have fallen between 30% and 35%, still comparatively lower than the aforementioned three populous states.

More broadly, Reay said among commercial real estate investments, hotels may be the best deal.

“The reason is that hotels are a daily business” compared to industrial, commercial or office building leases, which can last between three and 10 years, Reay said. Even if costs increase daily, such as for labor and goods, a hotel is able to adjust what it charges daily, he said.

“Most people believe that and that’s probably why we’re seeing a lot of interest in hotels (sales),” Reay said. “It’s the best product to invest in during times of inflation.”

Reay pointed out that Atlas Hospitality’s 2022 mid-year report should be viewed as a six-month metric compared to six months the previous year.

“We’ll have a much better picture when we get the year-end survey,” he said.

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