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Wednesday, May 22, 2024
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Industry Sources Say La Jolla’s La Valencia, Rancho Santa Fe Hotel to Go on the Block

The historic La Valencia Hotel in the tony community of La Jolla is going on the block, according to industry insiders.

If they are right, it would be the county’s second most important lodging sale to date, next to the sale of the iconic Hotel del Coronado in 2005.

Several well-qualified sources, who requested anonymity, said that La Valencia’s sister property, the Rancho Valencia Resort and Spa in Rancho Santa Fe, both owned by a partnership that includes the Collins Cos. of La Jolla, also is going to be sold.

Together, the two could sell for as much as $140 million, one source estimated.

Calls made to Harry Collins, who heads the Collins Cos., were not returned, and Bob Peterson, an executive of the firm, declined to be interviewed.

The sources said that the Collins Cos. plans to list both properties with Eastdil Secured Capital Corp., a real estate broker. They also said they expected that the listing would draw prospective buyers from across the United States and abroad.

Louis Stervinou, managing director of Eastdil’s San Francisco office, declined to comment, saying that it was against company policy to do so.

The 115-room La Valencia on Prospect Street, which houses The Whaling Bar and Grill, as well as the Sky Room, Mediterranean Room and Tropical Patio restaurants, overlooks La Jolla Cove and the Pacific Ocean.

Built in 1926, it has been rated a 4-Diamond property by the AAA Automobile Club of Southern California for 12 consecutive years and was listed on Conde Nast Traveler’s 2007 Gold List, as well as Travel & Leisure Magazine’s Top 500 list.


Valuable Property

According to Alan Reay, who heads the Irvine-based hotel brokerage Atlas Hospitality Group, La Valencia could fetch as much as $100 million, or $870,000 per room, if sold. If so, that would be the county’s highest transaction, considering that the 2005 purchase of a major share in the 679-room Hotel del Coronado in 2005 placed its value at $745 million.

Reay also said he thought that the Rancho Valencia, which was built in 1989 and has 54 suites on 40 acres in the ultrawealthy suburb of Rancho Santa Fe, could go for as much as $40 million.

Aside from a full-service spa, the resort’s amenities include the Rancho Valencia Restaurant, tennis courts, swimming pool and fitness room.

Atlas Hospitality publishes midyear and yearly reports on hotel starts and sales throughout the state.

Last year, it reported that 33 hotels were sold in the county for a total of $805 million. The median price per room was $98,718. The 235-room Hotel Solamar, which sold in downtown for $87 million, or $370,000 a room, had the highest per-room price.

Though interest rates on loans for hotel acquisitions and development have risen within the past few weeks as effects of the fallout in the subprime residential lending market move through commercial lending, Reay said he doubts that would deter interest in acquiring either the La Valencia or Rancho Valencia properties.

“The buyers for those deals wouldn’t have to worry about financing,” he said. “And if they’re worried, they’re probably not the right buyer.”

Both hotels are unique and irreplaceable, he added.

“The Valencia Hotel is unique because it’s in the center of downtown La Jolla and has spectacular ocean views,” Reay said. “But both La Jolla and Rancho Santa Fe have huge barriers to entry. There is no land left available for hotel development in downtown La Jolla and very little if any that I know of in Rancho Santa Fe.”


Prospective Buyers

One source said he expects that executives of the Collins Cos. would focus on selecting an individual buyer as opposed to a Real Estate Investment Trust, or REIT.

Reay agreed. Among potential buyers, he said, is Franklin Croft, who owns the La Jolla Beach & Tennis Club and recently purchased the 25-room boutique Colonial Terrace Hotel in Carmel for $10.1 million.

The Evans Hotel Group, whose holdings include the Lodge at Torrey Pines, the Catamaran and Bahia hotels in San Diego, could also be a potential buyer, as could Richard Bartell who heads Bartell Hotels, which has six hotels in the county, including Humphrey’s Half Moon Inn & Suites, Reay added.

No specific data was available on the average daily room rates and occupancy of either La Valencia or Rancho Valencia, but one source said he thought that La Valencia’s occupancy ranged between 88 percent and 92 percent annually.

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