With two recently announced transactions, Kimpton Hotel & Restaurant Group LLC has significantly boosted its presence in the San Diego hotel market.
The San Francisco-based company operates 52 boutique hotels across the nation, including the posh Hotel Solamar in downtown San Diego’s Gaslamp Quarter. It is now adding two high-profile local properties to its ownership and management roster.
In late May, a federal bankruptcy judge granted a motion by the owners of the struggling Se San Diego hotel, Fifth Avenue Partners LLC, to sell the 184-room downtown property to Kimpton for $49 million. The transaction includes 23 unsold condos and the adjacent House of Blues music venue.
Then on June 6, Kimpton announced it has taken over management of the 108-room Hotel La Jolla, after it was hired by the property’s new majority owner, an affiliate of Westport Capital Partners LLC.
A Kimpton spokeswoman said the company is not commenting on its plans for the Se San Diego while the bankruptcy case is being wound down.
However, in a statement regarding its management of Hotel La Jolla, Kimpton Chief Executive Officer Michael Depatie said San Diego has been a priority expansion market for the privately held company.
Attractive Location
“San Diego, in particular coastal San Diego, has been high on our list for continued expansion for some time,” Depatie said. “We are so proud our growth in the market comes with this prominent and popular hotel and restaurant in one of the city’s most exclusive and desirable communities.”
Located on La Jolla Shores Drive, Hotel La Jolla opened in 1972 and has recently undergone renovations totaling approximately $4 million.
Sean Armstrong, a principal with Westport Capital Partners, said Kimpton was chosen to manage the property based on its experience with mid-sized, upscale hotels, generally referred to in the industry as boutique properties.
The privately held Westport has operations in El Segundo and Connecticut, and its specialties include dealing with distressed properties. Armstrong said the firm is not disclosing the exact acquisition price, but the Westport affiliate purchased debt on the property totaling approximately $30 million at a discount.
It is also infusing some of its own capital to complete renovations started by the previous majority ownership group. That group includes locally based Cove Equity Group LLC, with members including local homebuilder Ure Kretowicz.
The prior majority ownership team, which will stay on as minority partners, encountered problems paying back loans in 2009, after purchasing Hotel La Jolla for $25 million in 2005.
“It’s a great asset that unfortunately got caught in the recessionary cycle, and the prior owners were not able to complete the renovations,” Armstrong said.
Long List of Renovations
According to Kimpton, Hotel La Jolla has had significant renovations in all of its guest rooms, and is slated for a “major remodel” to its restaurant, reception area, lobby and outdoor pool areas, to be completed in early 2012.
The restaurant will be relocated from the 11th floor to the first floor, where it will offer outdoor seating. Also, the main level will be remodeled to include a reception area and living room, with a lobby bar adjacent to the hotel’s swimming pool and poolside cabanas.
Alan Reay, president of brokerage and consulting firm Atlas Hospitality Group, said he does not expect “huge changes” as Kimpton takes over Se San Diego, which opened in 2008, though the hotel will likely benefit from the firm’s nationwide management and marketing expertise.
He said Kimpton appears to be a good fit for both Se San Diego and Hotel La Jolla, since its specialty is upscale hotels in the 100- to 300-room range.
Reay said boutique hotels have generally held up well in recent months as the tourism economy improves, especially in trendy areas of cities including San Francisco, West Hollywood and San Diego’s Gaslamp Quarter.
However, boutique hotels did not bounce back from the recession as quickly as the larger upscale hotels that carry global brand names, and which garner stronger corporate business. The larger trophy hotels have also received more interest from big investment firms, with several changing hands locally in recent months.