Two high-profile Santa Barbara hotels were acquired by billionaires in 2021, according to Hayes Commercial Group’s recently released South Coast market report.
Diane Hendricks purchased the 75-room Hotel Santa Barbara in downtown Santa Barbara for $41.9 million in the fourth quarter of 2021, following Bill Foley’s purchase of the Hotel Californian near Santa Barbara’s waterfront and Funk Zone for $130 million in the third quarter last year.
Foley is the owner of the Las Vegas Golden Knights and wineries including Firestone, and has a net worth of $1.6 billion, according to Forbes. Hendricks is the founder and owner of ABC Supply, one of the nation’s largest suppliers of roofing, vinyl siding and other construction materials, and Forbes lists her net worth at $10.9 billion.
“If you were considering scooping up a hotel at a bargain price while the hospitality industry is in recovery mode, these three hotels all traded for more than $1,000 per square foot, not exactly ‘COVID-discount’ pricing,” Hayes’ report states.
Also in late 2021, a local development team purchased most of La Cumbre Plaza in Santa Barbara, including the Macy’s and surrounding parking areas, for more than $60 million, and an investor bought the Nordstrom building in Paseo Nuevo for $13 million.
Hayes’ report states both buyers will reportedly be “pivoting the properties away from retail as the primary use,” with the La Cumbre Plaza buyers planning a large residential redevelopment and the Nordstrom building moving to mostly office space.
There were five retail property sales on State Street in downtown Santa Barbara, and four more within a block of State Street, according to Hayes’ report.
Hayes said a notable example is the local Winn-Twining family purchasing the Public Market on West Victoria Street and an adjacent space.
“When combined with the prominent hotel sales, this group of buyers represent new ownership blood willing to have a stake in downtown, despite the challenges facing that commercial zone,” Hayes’ report states.
The fourth quarter of 2021 was the highest-volume sales quarter on record, with 117 commercial sales, valued at $770 million — $524 million excluding hotels.
The commercial sales volume in Santa Barbara was “tremendous, far exceeding any prior year on record,” the report states.
The market report found that leasing volume has not recovered to pre-COVID levels. In 2021, lease considerations were 26% below compared with the pre-pandemic five-year average.
Lease rates grew 10% year-over-year last year and were 5% above the pre-pandemic average.
The city of Santa Barbara was the “primary locus of the surge in deal flow,” Hayes’ report states. Its 89 transactions and $340 million in non-hotel volume were 53% and 78% above the five-year averages, whereas activity in Goleta and Carpinteria generally matched historical trends, according to Hayes.
Hayes said office property sales did not “repeat the remarkable volume” seen in 2020, and the $154 million transacted in 2021 was 11% below the prior five-year average.