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La Costa Property Gives Omni a San Diego Jewel

Aside from installing the Omni banner effective July 1, the new owners of La Costa Resort and Spa plan no immediate changes at the Carlsbad golf property, which completed an extensive $50 million makeover in 2011.

“We’re planning to keep everybody in place,” said Ed Netzhammer, senior vice president of operations in the Dallas headquarters office of Omni Hotels & Resorts, referring to La Costa’s approximately 1,100 employees.

The resort was recently the focus of Southern California’s largest hotel property transaction so far in 2013, when Omni Hotels agreed to buy the 611-room, 400-acre property from affiliates of KSL Capital Partners LLC of Denver. The buyer and seller did not immediately divulge the transaction price.

According to property data provider Real Capital Analytics Inc., Omni is paying an allocated $365.8 million for La Costa, making it the largest of five U.S. properties being acquired from KSL in an off-market portfolio deal totaling nearly $900 million.

Second Largest Per-Room Price

Alan Reay, president of brokerage and consulting firm Atlas Hospitality Group in Irvine, which was not directly involved in the deal, said those figures make the La Costa Resort deal the largest by dollar volume so far this year in Southern California, and also the second-largest per-room price ever paid for a hotel in San Diego County, at $598,751.

The only pricier per-room deal involved L’Auberge Del Mar, which sold last year for $76.9 million, or $640,000 per room.

Reay said the La Costa deal reflects a dramatic turnaround for the Carlsbad property and high-end resorts in general. Upscale luxury resorts were the hardest hit during the economic downturn in terms of revenue performance, but have also seen the strongest bounce-back since 2010.

Reay noted that KSL in 2010 paid approximately $125 million for the $380 million in debt that the La Costa property had accrued under prior ownership. It has since completed a renovation topping $50 million, which included the property’s guestrooms, event and meeting spaces, and famed golf courses.

“An almost $200 million gain in three years is a pretty good return on their investment,” Reay said of KSL.

Omni is also taking over daily operations of La Costa Resort from KSL’s management affiliate, KSL Resorts of La Quinta. A La Costa Resort spokeswoman said KSL was referring all queries about the latest deal to Omni Hotels.

Taking the Omni Banner

La Costa Resort is the region’s eighth-largest hospitality property by room count and has operated in its current format since 2001.

It is scheduled in July to take the Omni Resort Collection banner, along with four other resorts purchased by the company from KSL affiliates: Rancho Las Palmas Resort & Spa in Rancho Mirage; Barton Creek Resort & Spa in Austin, Texas; The Grove Park Inn in Asheville, N.C.; and The Homestead in Hot Springs, Va.

Netzhammer said Omni’s five-property acquisition strengthens its presence in San Diego County and the four other markets where its new hotels are located, with holdings that are generally well reflective of their local communities in their design and features. Currently, its only local hotel is downtown’s 511-room Omni San Diego Hotel, which opened in 2004.

Looking for More

“We were able to get some great properties at a much lower price than it would have cost to develop them,” Netzhammer said. “We’re continuing to scout for strong additions to our portfolio.”

Before its latest purchases, the privately held Omni owned 51 U.S. properties totaling about 18,000 rooms and employing 14,000. The five new resorts add 2,300 rooms, 12 golf courses and three water parks, among other elements.

Prior to the La Costa sale, the largest local hotel deal of 2013 involved the 337-room Embassy Suites San Diego Bay in downtown San Diego, purchased in January for $112.5 million by Maryland-based Pebblebrook Hotel Trust. Reay said California and the nation could see more high-end hotels change hands in coming months, spurred by transactions including the Omni-KSL deal.

“I think more of these hotel owners, who took a beating during the downturn, are going to be very interested in the prices at which some of these properties are selling,” Reay said.

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