SAN DIEGO— When Strategic Hotels & Resorts in early January closed on its roughly $70-million acquisition of 45% of the famed Hotel del Coronado here, the deal would turn out to be only the first of a long list of property transactions this year in this popular Southern California destination. Among the acquirers have been such well-known ownership groups as Sunstone Hotel Investors, LaSalle Hotel Properties, and Innkeepers USA Trust as well as Strategic. While Hotel del Coronado (“the Del”) is one of the country’s better known independently branded hotels, the actual hotel brand names that have changed hands in San Diego this year have included Hilton, Marriott, W, Embassy Suites, and Hyatt Regency. These are all upscale or upper-upscale names. But the market has been strong for mid-price product as well, with two examples being the sale of at least one Holiday Inn and one extended-stay Residence Inn by Marriott. As in other markets, booming transactions activity reflects solid underlying demand for hotel rooms, which is reflected in rising occupancy, ADR and RevPAR. San Diego is particularly well positioned, however, because it’s among the few markets that pose a triple threat: it draws leisure travelers to its resorts; corporate group business to both its resorts and downtown convention hotels; and transient business travelers to its downtown hotels and suburban/office park locations. The 679-room Hotel del Coronado was originally built in 1888 and designated a national landmark in 1977. The property’s 130,000 square feet of meeting space make it a major draw for corporate groups. Chicago-based Strategic aside, an affiliate of Kohlberg Kravis Roberts & Co. owns 41% of the property, while KSL Resorts holds the remaining 14%. Given the strength of the local market, Strategic CEO Laurence Geller was attracted to the development potential of the site. Already 28 condo hotel units are being added to the resort’s north beach area. Geller was already sold on San Diego’s appeal from owning the 419-room Hyatt Regency La Jolla Avertine with its relatively modest 30,500-square feet of meeting space. San Clemente, CA-based Sunstone is also a multiple owner in the market as is LaSalle. In June, Sunstone completed its purchase of the 259-room W Hotel San Diego, paying approximately $96 million for the four-year-old asset. The seller was a joint venture of Multi-Employer Development Partners, which held the majority stake; Gatehouse Capital; and W’s parent, Starwood Hotels & Resorts Worldwide. Meanwhile, earlier in the year, Sunstone had closed on its purchase of the 284-room San Diego Marriott Del Mar for $69 million and the 335-suite Embassy Suites San Diego La Jolla for $100 million. Both deals involved undisclosed sellers. Yet Sunstone CEO Robert Alter knows when to be a seller as well as a buyer, no matter how appealing the market may be. In September, for example, Sunstone disposed of the 175-room Holiday Inn San Diego-Mission Valley as part of a 13-hotel portfolio that went to an affiliate of Trinity Hotel Investors, LLC for a cumulative price of $144 million. The move was part of a larger strategy on the part of Sunstone to concentrate on higher-end assets. “We plan to reinvest the proceeds from the sale into hotels that fit a similar profile to hotels like the W and other recent acquisitions,” Alter noted. Similarly, the portfolio of Bethesda, MD-based LaSalle is rich in San Diego product. The latest addition to that roster, announced in August, is the 235-room Hotel Solamar, which was acquired from JMI Realty for $87 million. Like the W, the 16-month-old Solamar is located in downtown San Diego close to the trendy Gaslamp District. The Kimpton Hotel & Restaurant Group, LLC operates the hotel. The Solamar deal follows on the heels of LaSalle closing earlier in the year another local acquisition, the 357-room Hilton San Diego Resort, which it purchased for $90 million from Hilton Hotels Corp. Hilton was looking to se
