San Diego Business Journal

A combination of improving fundamentals and rising investor demand brought a surge of California hotel sales in 2010, and conditions appear ripe for a continuation of that dynamic in San Diego County this year.

Irvine-based brokerage and consulting firm Atlas Hospitality Group reports that the number of hotels sold jumped 80 percent statewide (to 166), and the dollar volume was up more than 240 percent (passing $1.7 billion) from record lows seen in 2009.

In San Diego County, the number of properties sold went from six to 15, and the dollar volume more than quadrupled, topping $247 million, according to Atlas data released March 3.

“With the number of deals already on the market and in escrow, we are expecting San Diego County to see at least a 60 percent or higher increase in sales over 2010,” said Atlas President Alan Reay in an e-mail, referring to 2011 prospects.

The state’s largest hotel transaction of 2010 involved the sale of the 479-room La Costa Resort and Spa in Carlsbad, purchased for $125 million.

Other big local transactions of the past year included downtown’s 264-room Sheraton Suites San Diego ($37.7 million), the 145-room Homewood Suites in Carlsbad ($32 million), and the 54-room Rancho Valencia Resort in Rancho Santa Fe ($15.5 million).

San Diego County last year was also among the California regions most prone to hotel loan foreclosures and delinquencies, which played a role in local turnover. Atlas has projected a leveling off in distress this year, with hotels since mid-2010 seeing improving revenue and occupancy trends, though lenders will continue to “aggressively sell” hotel loans.

Atlas predicts California could see 200 or more properties change hands this year, with continued strong buying activity among trophy hotels. The larger purchases will be dominated by real estate investment trusts.

So far in 2011, San Diego has seen The Blackstone Group LP take a majority stake in the historic Hotel del Coronado, as part of a $425 million refinancing; and Host Hotels & Resorts Inc. acquire the Manchester Grand Hyatt, the region’s largest hotel, for $570 million.

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Blackstone’s Local Portfolio Grows: Speaking of Blackstone Group, the giant New York-based investment firm continues to raise its local profile among landlords. It is now the owner of two San Diego County shopping centers, after acquiring nearly 600 shopping malls from Australia’s Centro Properties Group for $9.4 billion.

The portfolio includes Felicita Plaza, at West Felicita Avenue and South Centre City Parkway in Escondido; and Mira Mesa Mall, on Mira Mesa Boulevard in San Diego.

This is considered the first major shopping center investment by Blackstone, which is active in several property sectors. Its portfolio of companies includes hotel giant Hilton Worldwide, as well as SeaWorld Parks & Entertainment, operator of SeaWorld San Diego.

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Sandwich Chain Opens First Local Shops: Another player has stepped into the crowded arena where franchised submarine sandwich shops do battle, and San Diego County is a priority market for the newcomer.

On March 7, Delaware-based Capriotti’s Sandwich Shop opened its first two local restaurants. They are at 1620 Camino de la Reina in San Diego’s Mission Valley; and 1158 W. San Marcos Blvd. in San Marcos.

San Marcos happens to be the headquarters city of Submarina Inc., which has about 50 restaurants and competes locally with ubiquitous chains such as Subway and Quiznos.

Capriotti’s Chief Executive Officer Ashley Morris said the company, which has 69 locations nationally, differentiates itself with fresh meats cooked on the premises for its turkey, roast beef and pastrami sandwiches.

“This is not a processed ball of turkey,” Morris said, in a phone interview. “This is a turkey that was cooked and deboned at the restaurant — it’s the same turkey you would have on Thanksgiving.”

The eateries are approximately 1,500 to 1,700 square feet in size, with an ordering setup similar to those seen at fast-casual chains like Panera Bread. “It’s not an assembly line where you walk along the counter and tell the staff what ingredients you want,” Morris said, of Capriotti’s. “You actually order from a menu, and we bring it to your table or call your name when it’s ready.”

The chain was launched in 1976 and recently made its Southern California debut with two openings in Los Angeles. Plans are in the works to open two or three more San Diego County stores by the end of 2011. Morris said Capriotti’s aims to have about 20 local eateries in the next five years.

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Investment Firm Acquires Kearny Mesa Center: Omninet Capital LLC is the new owner of Rancho Serra Mesa, a neighborhood retail center on Greyling Drive in San Diego’s Kearny Mesa neighborhood. The 55,000-square-foot center, anchored by CVS Pharmacy, has a tax value of approximately $6.7 million, according to Omninet Managing Partner Benjamin Nazarian.

The company said the transaction officially closed on March 4. The center was acquired from lenders out of receivership proceedings involving the former owner.

Last year Omninet, a Beverly Hills-based private investment firm, announced it planned to make $100 million in San Diego commercial real estate investments over the next few years. Its recent buys have included the Sky Park Business Center, off Aero Drive in Kearny Mesa, with a value of $9.2 million.

Send commercial real estate and development news of general local interest to Lou Hirsh via e-mail at lhirsh@sdbj.com. He can be reached at 858-277-8904.