They’re planning a May reopening for the posh, 42-acre desert property, shuttered for the past three years, with plans for at least $1 million in renovations and hopes of restoring its luster as a remote but luxurious getaway for VIPs and other solitude seekers since the 1940s.
“We want to restore this to where it once was, where a lot of people felt it was this very nice, quiet place to get away and relax,” said McGrory, an equal partner in the new ownership venture, Casa del Zorro LLC, with local hotelier Jack Giacomini and real estate executive Casey Brown. “We also see it as a great place for corporate retreats because you can go there and you won’t be bothered.”
Another priority, he said, is reviving the property’s role as a vital economic asset for the Borrego Springs community, which was especially hard hit by the struggles of that and other nearby hotels over the past few years. Plans call for the resort at peak times to employ around 50 full-time and 20 part-time staff, many of them local residents, especially as the property’s restaurant, spa and other services get back into full swing.
Giacomini is chairman of San Diego-based Hotel Managers Group and a minority partner in a group that owns Crowne Plaza Hanalei in Mission Valley. He will oversee most of the transformation and renovation of the new Casa del Zorro.
Giacomini said the new owners are mulling a possible management partnership with a national or international hotel operating company, which might help raise the profile of the Borrego Springs resort by leveraging the larger firm’s reservations and marketing platforms.
That could help the property gain traction with travelers in places like Europe, where there is already high demand for nature-oriented U.S. vacation getaways near hiking, camping and scenic viewing sites. The goal is to compete with desert destinations like Palm Springs, which draws a large contingent of local and international visitors.
The 63-room property has seen several incarnations over the years, and was owned for more than four decades by the Copley family, former owners of the San Diego Union-Tribune and several large real estate holdings throughout the region.
In 2007, the property was purchased by GH Capital LLC of Sherman Oaks, led by Gregory Perlman, which renamed it Borrego Springs Ranch and invested $7 million in renovations before closing it in January 2010, amid a rough economy and other financial issues facing GH Capital at the time.
Alan Reay, president of brokerage and consulting firm Atlas Hospitality Group, which was not involved in the Casa del Zorro deal, said the new owners have a slew of opportunities and challenges ahead of them.
The Pluses and Minuses
Advantages include the low purchase price and the prior owner’s extensive investment in renovations about a year before the 2010 closure, which will allow the new operators to concentrate more resources on repositioning. Challenges include the property’s remoteness, about 75 miles from San Diego, far from supply and service vendors needed to operate a hotel, which because of fuel and other expenses could add to overhead costs over the long run.
That could put pressure on room pricing, although the owners have said they would like to cap daily rates at around $200 — lower than the $300 to $400 that the prior owner was charging.
Reay said the property might do well to position itself in the niche luxury category, with resorts like The Golden Door Resort Spa in San Marcos and similar properties in Tucson, Ariz., where visitors are willing to pay a premium for access to remote, high-end amenities.
Among bigger-picture caveats is that despite an overall improving visitor economy, other hospitality investors in Borrego Springs have recently struggled with their ventures.
For instance, lenders are currently marketing the 60-room Palm Canyon Resort for sale, after foreclosing on the prior owner, Mallard Investment Group Inc. The golf and vacation home community now known as Montesoro, most recently owned by Perlman’s GH Capital, was also foreclosed on by its lender and is also up for sale, Reay noted.
The new owners of Casa del Zorro are confident that an improving economy will help their property flourish. They note that the resort has additional property assets, currently going unused, that could help boost amenities, add revenue and buffer their investment risk.
All of the partners are longtime investors and developers in San Diego County commercial real estate. After serving as San Diego’s city manager from 1991 to 1997, McGrory worked as a real estate executive for a company led by Price Club founder Sol Price, and later for the San Diego Padres, overseeing much of the downtown development work that eventually included Petco Park.
More recently, McGrory formed La Jolla MJ Management with the late banker and philanthropist Murray Galinson, partnering on commercial and residential development and venture capital investments throughout the region.
Brown is president and co-founder of San Diego-based BBL Inc., which in the past 18 months acquired three large local office buildings in transactions totaling $130 million, including downtown San Diego’s Bank of America tower. Brown said the hotel venture is totally separate from his work with BBL, and the new owners of La Casa del Zorro may be exploring other future hospitality acquisitions once the resort is up and running.
“The main focus now is to get this property back to where it was, if not in its heyday, at least back to where it’s known as a very distinctive hotel within San Diego County,” Brown said.