Real estate company says now is a good time for sellers and buyers of hotels
Hotel Indigo, a boutique hotel on the Santa Barbara beachfront, recently sold for more than $19 million.
The Funk Zone hotel was brought on the market in late 2021 by Austin Herlihy and Chris Parker of Radius Commercial Real Estate.
The hotel, which is at 121 State St., was listed at $19,350,000. The business has 41 rooms, so its sale price works out to almost $472,000 per key.
According to Radius Commercial Real Estate, the listing generated 11 offers and closed in only 45 days, about half the time of the standard 90-day closing period for hotels.
The buyer is an investor who plans to continue to operate Hotel Indigo as an independent or branded hotel.
The franchise agreement of the partnership that owned the hotel Indigo was coming upon its expiration date, and the partnership decided that it was a good time to sell.
The managing partners of the partnership are Laurie and Mark Recordon. The hotel was originally purchased by the partnership in 2010 out of foreclosure and was previously a youth hostel.
“I think as we continue to experience a resurgence in South Coast tourism following a rough 18-plus months due to the pandemic, we’re going to see more and more activity and interest in local hotel assets,” Mr. Parker, broker for Radius Commercial Real Estate, said in a news release.
One of the special features of Hotel Indigo is its beachfront location.
“I think it is safe to say it increases the value. If you are a tourist, being close to the beach, the pier and the Funk Zone, makes it a much more attractive location.,” Mr. Parker told the News-Press Thursday.
Mr. Herlihy, executive vice president of Radius Commercial Real Estate, also talked with the News-Press about the hotel’s unique location.
“The Funk Zone is a coastal area below the freeway that was originally an industrial area that has been transformed into a wine tasting and foodie atmosphere including breweries, wineries and outdoor dining,” Mr. Herlihy said Thursday.
Mr. Parker noted other unique facets for the hotel.
“The restaurant Santo Mezcal and European-style rooms as well make the hotel unique,” he told the News-Press. “The hotel is really well done. It was renovated in 2012, and they did a good job delivering a nice product. There are a lot of smaller mom-and-pop hotels on the beachfront making this hotel unique.
“What has been beneficial is that with COVID, people have not been traveling abroad, so local drive-to markets have increased,” Mr. Parker said.
Mr. Parker and Mr. Herlihy also represented the sellers of Hotel Californian, which is across the street from Hotel Indigo and was sold in September. Mr. Herlihy said the five-star, 121-key luxury hotel’s sale helped to increase the property value and sale for Hotel Indigo.
Mr. Parker said hotels in drive-to markets “have really turned a corner,and are doing quite honestly, very well. And I think the future for hotels locally is pretty bright, and I think the buyers feel the same way.”
Mr. Herlihy agreed, noting there’s a strong demand for hotels. He said hotels’ owners see this as a good time to sell, “and there are a lot of buyers with money, looking to make purchases like these as a hedge against inflation.”