JRK Property Holdings, through its $350 million hospitality fund, has acquired the 394-room Hilton La Jolla (Calif.) Torrey Pines from Braemar Hotels & Resorts for $165 million. Braemar announced plans to sell the resort in May, along with two other hotel sales to be completed in 2024 and 2025.
Because of the challenging capital markets now, and for the past few years, JRK was able to take a longer term view on the property. "Rather than looking at higher interest rate right now, we were able to get really good, unlevered value for an asset that, normally, you can never get your hands on," said Shaan Bhatia, head of hotel investment for JRK Property Holdings. "This is very much a trophy-type location with a very real quality asset."
Since the property needs a "little bit of love," according to Bhatia, JRK plans on spending at least $30 million on the property over the course of its ownership.
"The reason we decided to invest in [the Hilton La Jolla Torrey Pines] is because it's a very defensive cash-flow asset," he continued. "In 10 years, it hasn't had a down year outside of COVID. The area is super supply constrained. At the very least, we feel like we got good, attractive yield in place, and the capital that we'll spend over the course of our whole period should help elevate the property and get the return for our investors.
"It's hard to find the type of yield that we got here for the quality of the real estate that you get. So it was just an amalgamation of all those things that made it super compelling for us."
The resort sits on an 11.4-acre site adjacent to the Torrey Pines golf course, 15 miles north of downtown San Diego. Resort amenities include guestrooms with balconies overlooking the golf course and Pacific Ocean, three food and beverage venues, outdoor pool, fitness center, tennis and pickleball courts and 65,200 square feet of meeting space. Guests at the Hilton Torrey Pines Hotel also receive exclusive tee times for Torrey Pines Golf Course, which has hosted PGA Tour events since 1960.
According to the San Diego Tourism Authority, the region attracted approximately 30.5 million visitors in 2023, driving occupancy rates in the region to near record levels at 73 percent. The upscale, full-service Hilton Torrey Pines hotel has outperformed the competitive market in occupancy, average daily rate and revenue per available room every year since 2016, according to Eastdil Secured, which marketed the property on behalf of the seller.
JRK’s Hospitality Fund focuses on full- and select-service hotels for opportunistic and value-add investments. The fund targets transactions of more than $30 million. JRK intends to acquire over $500 million of additional assets in the hospitality space over the next 12-18 months.
Earlier this year, JRK Property Holdings, also through its hospitality fund, acquired a two-property, 275-key Hyatt-branded hotel portfolio in San Juan, Puerto Rico from the PRISA Group for an undisclosed price.
"We've done over $200 million of hotel deal flow this year, which I think makes us one of the most active buyers in the country," Bhatia said. "So we are very active and looking to be more active the rest of this year [and] into early next year. I think we're able to take advantage of our long-term hold, and look through some of the murkiness, which I think provides a huge competitive advantage to us in today's environment."
Other assets in JRK’s hospitality portfolio include Oceana Santa Monica; a five-property Marriott flagged portfolio in Austin, Texas; the Ace Hotel in Palms Springs, Calif.; and a two-property Hyatt flagged portfolio in San Juan, Puerto Rico.