West Coast Deals Find Bacara Snagged by CWI 1&2

NATIONAL REPORT—Transaction activity on the West Coast finds lodging REITs Carey Watermark Investors Inc. (CWI 1) and Carey Watermark Investors 2 Inc. (CWI 2) acquiring Bacara Resort & Spa and rebranding it as a Ritz-Carlton.

The 358-key, 24-building resort is located on 78 oceanfront acres near Santa Barbara and the Santa Ynez Valley wineries.

The property recently completed a four-year renovation totaling approximately $27 million ($75,500 per guestroom) and included new soft- and casegoods in all guestrooms, technology upgrades and a repositioning of Bacara’s food and beverage outlets.

The REITs plan to invest a “significant amount” of additional capital to further upgrade the resort, including enhancements to the meeting space, lobby, food and beverage outlets, fitness center, pool and spa.

The hotel will be managed by The Ritz-Carlton Hotel Co. LLC, part of Marriott International. The hotel is now known as The Ritz-Carlton Bacara, Santa Barbara.

With extremely high barriers to entry, the property is one of a limited number of luxury oceanfront resorts on the California coast. According to the REITs, California luxury oceanfront resorts have outperformed the national lodging market, achieving average annual occupancy of 70% since 2013 and annual RevPAR growth of 5.7% over the same period. The local Santa Barbara market has performed very strongly as well, with average occupancy of 79% and annual RevPAR growth of 7.7% since 2013, it was noted. As of June, Santa Barbara’s year-to-date RevPAR was up 6.1%, materially above the national average of 3%, according to the Trusts.

Michael Medzigian, CEO of CWI 1 and CWI 2, said: “The acquisition of Bacara Resort & Spa represented the opportunity to acquire one of a select few true luxury California oceanfront resorts in a one-of-a-kind location. Given the lack of comparable sites, the difficulty, time and effort associated with obtaining approvals and entitlements as well as the enormous cost to construct a property of this scale and caliber, the property is truly irreplaceable from both a cost and opportunity standpoint.”

Waiting in Washington State

Another West Coast property looking to be acquired is the Rodeway Inn in Wenatchee, WA. The Amber Hotel Co. has the 37-key property on the market for $1.55 million. Amber notes the property has more than $150,000 in NOI and would be “ideal” for an owner/operator as it has a large manager’s apartment.

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