SANTA BARBARA, CA—Hersha Hospitality Trust has acquired the Hotel Oceana, an independent hotel in Santa Barbara, for $41.7 million. The purchase price includes an 8.6% capitalization rate over a trailing 12-month net operating income.
Santa Barbara is one of the country’s top RevPAR markets. Last year, the hotel reported an average of 92% occupancy with a RevPAR of $196.61 and an ADR of $241.34. Located on the ocean, the property is set on two acres and is walking distance to the shops and restaurants in Downtown Santa Barbara. These characteristics are similar to Hersha Hospitality’s Manhattan-based hotel assets, making it an attractive opportunity.
To fund the acquisition, Hersha Hospitality sold a portfolio of 16 non-core assets and took on $24.9 million of mortgage debt, which will incur a 4.4% interest rate annually through 2023. “The completion of the Hotel Oceana acquisition is further indication of our commitment to prudently recycle capital,” says Jay H. Shah, Hersha Hospitality CEO, adding that the company sold $400 million in assets in 2012 and 2013 and acquired $525 in the same period of time. “These initiatives have resulted in a refined pure play transient focused portfolio with exposure to the highest demand gateway markets in the United States. Together with our properties in San Diego, Los Angeles and the San Francisco Bay Area, the Company’s West Coast assets are positioned to leverage solid growth fundamentals and limited supply growth in some of the leading markets on the West Coast.”
The Santa Barbara market has a high barrier to entry for new hotel developments. GlobeSt.com reported last year, however, that Fespar Enterprises is planning a new 86,000-square-foot hotel development next to the company’s DoubleTree Hotel in Santa Barbara. The proposed hotel will have 50 to 65 guestrooms.