If all goes as expected, the pending sale of the Shelter Pointe Hotel will bring to seven the total number of major hotel transactions that have been completed in the county since January.
The fact that at least four others are said to be on the block has prompted one broker to note that he hasn't seen this much hotel sales activity in San Diego since foreclosed inns went for bargain basement prices during the state's economic recession of the 1990s.
According to the San Diego Unified Port District, Shelter Pointe LLC earlier this month received the agency's approval for a "lease assignment" to Atlas Kona Kai LLC, which includes two San Diego-based firms, Atlas Hotels Inc. and Bartell Hotels Inc. A lease assignment is a legal term that basically means transferring the terms of a lease to a new entity.
The Shelter Pointe lease has about 27 years remaining before it expires. Approving the lease assignment, said Chris Richards, the Port District's asset manager, paves the way for its sale, which is expected to be finalized by the end of this month.
The hotel's price tag was not disclosed, but sources estimate that it is worth $27 million.
Neither Richard Bartell, who heads Bartell Hotels, nor Terry Brown, who heads Atlas Hotels, returned phone calls regarding the pending acquisition of the 206-room Point Loma hotel, which is on 13.26 acres on Shelter Island Drive.
Bartell Hotels includes Humphrey's Half Moon Inn & Suites and the Best Western Island Palms Hotel & Marina, adjacent to the Shelter Pointe Hotel. Atlas Hotels' holdings include the Town & Country Hotel in Mission Valley.
According to the Port District, Joel Moody, an executive with New York City-based Investcorp International Inc., is an officer in Shelter Pointe LLC. He did not return phone calls.
Bidding Wars Are On
"We were engaged in hotel sales during the state's real estate downturn, and I'd say there is as much fervor in the market now as there was back then between 1993 and 1997," said Alan Reay, the president of Atlas Hotel Group, the Costa Mesa hotel broker, which surveys and reports on hotel sales and construction statewide. (Atlas Hotel Group is not affiliated with Atlas Hotels Inc.)
While interest in owning San Diego hotels has grown in the past year, particularly among national institutional investors, as lending capital has become readily available at favorable rates, Reay said the pending sale of the Shelter Pointe to an entity formed by two San Diego firms shows a new trend.
"As more properties have come available, some of the local players have made offers and missed out, now more are stepping up to the plate," he said.
But they're entering something of a bidding war, Reay said, describing a typical scenario in which an initial cut weeds out the lower offers. After that, the prospective buyers in the top tier are invited to resubmit their bids, which usually are higher.
Reay is finalizing numbers for a report on the state's hotel sales for the first half of the year. He has yet to break out transactions by counties, but preliminary findings show that 17 inns sold between January and June vs. 13 in the same year-ago period. During the first half of 2003, nine hotels were sold.
Richards said Atlas Kona Kai LLC has tentative plans that include redeveloping a portion of Shelter Pointe into facilities for the adjacent Best Western Island Palms. Currently, that section of the Shelter Pointe, which sits between the two hotels, includes a tennis court, parking lot and the former Voyager Restaurant, which is now being used for parties and events.
It's undetermined what the scope of the redevelopment may involve. Indications are that it might include conference or meeting space. However, those plans would also have to be brought before the Port District, which has jurisdiction over San Diego's tidelands.
The Shelter Pointe, formerly the Kona Kai, dates back to 1953, according to Port District records. It has been expanded and renovated through the years, including one major redevelopment between 1994 and 1995, which cost $19.5 million. Since the agency was created in 1962, its records don't indicate how many owners the hotel has had, but they show 12 different lease assignments for the property.
Last summer, the Shelter Pointe spun off its 524-slip marina to San Diego Marina LLC for $18 million.
Six other major hotels have sold since January: the 350-room Hilton Mission Valley; the 282-room Hilton San Diego Gaslamp Quarter; the 224-room Courtyard by Marriott on Broadway in Downtown; the 145-room Courtyard by Marriott in Carlsbad; the 118-room Staybridge Suites on Innovation Drive in Mira Mesa; and the 316-room Holiday Inn Mission Bay SeaWorld.
Aside from the Shelter Pointe, pending sales include the 108-room Hotel La Jolla on La Jolla Shores Drive.
According to several sources, including the sellers, at least four others are on the block , the 450-room Westin Horton Plaza on Broadway Circle in Downtown; the 261-room W San Diego in Downtown's Marina District; the 422-room Hyatt Regency Islandia on Mission Bay; and the 284-room Marriott Del Mar on El Camino Real, having a total estimated worth of at least $333 million.
In 2004, the largest hotel that sold in San Diego was the 192-room Residence Inn Mission Valley, which went for $37.2 million.