Pebblebrook Hotel Trust Buys La Jolla Hotel for $108M

Pebblebrook Hotel Trust has acquired the AAA Four Diamond 210-room Estancia La Jolla Hotel & Spa for $108 million, and has retained Noble House Hotels & Resorts to manage the property. Pebblebrook funded the acquisition $46 million of cash on hand, and it assumed a $62 million of existing non-recourse, secured debt, which matures in September 2028.

Estancia La Jolla is on 10 acres, and it is walking distance to Black’s Beach, Salk Institute for Biological Studies, and the University of California, San Diego. In addition to the 210 guestrooms, the property features 50,000 square feet of indoor and outdoor meeting and event space; Spa Estancia, a 7,000 square-foot sanctuary with 11 indoor and outdoor treatment rooms; several dining options; a fitness center and an outdoor saltwater pool with poolside cabanas.

The hotel is among the top drive-to destinations for leisure travelers, but it is also a major hub of life science activity, providing a second demand driver for hotels in the market. For the last year, the hotel has performed well, forecasted to produce $308 to $313 of TRevPAR, EBITDA of $4.6 million to $4.7 million and net operating income of $3.7 million to $3.8 million after a 4% capital reserve. Looking at operations before the pandemic, the resort generated EBITDA of $8.1 million and NOI of $6.7 million in 2019.

Pebblebrook is looking at capital improvements to increase cash flow. Renovations under consideration include guestrooms, lobby, spa and pool areas, event lawns and expansive ballroom. In addition, the hotel will become part of the Curator Hotel & Resort Collection, which will help to reduce operating expenses through technology and other operational efficiencies.

The hotel investor has made strategic portfolio changes this year. In July, it entered into a contract to sell the Villa Florence San Francisco for $87.5 to an unaffiliated and unnamed third party. Villa Florence San Francisco is a 189-room hotel in San Francisco’s Union Square, along the Powell Street Cable Car Line. It is walking distance to Chinatown and Moscone Center.

In April, Pebblebrook Hotel Trust sold another San Francisco asset, the 416-room Kimpton Sir Francis Drake Hotel in San Francisco for $157.6 million. The property sold to an unaffiliated and unnamed third party.