Southern California poised for record number of new hotel rooms in 2019

Lori Weisberg, The San Diego Union-Tribune on

Published in Business News

Cisterra Project Principal Jason Wood said Tuesday that he is optimistic about securing financing by the end of this quarter.

While San Diego County trailed Los Angeles and Orange counties in the new construction category, it led Southern California in terms of the percent increase in hotel openings last year.

It also boasted the largest hotel opening -- the 400-room InterContinental downtown -- which was among 1,224 hotel rooms that opened in the county in 2018. That's a 48 percent increase over 2017. All other Southern California counties saw a decline in the total number of hotel rooms that debuted in 2018, Atlas reported.

Like Reay, San Diego real estate economist Nathan Moeder is seeing signs of a cooling market for new hotel development.

"Last year, there were a lot of hotel completions and beginnings because the projects were already financed but halfway through the year, the capital markets started to change because they know we're nearing the peak of the cycle," said Moeder, a principal with London Moeder Advisors. "And when that happens, lenders and equity groups are a little more timid and cautious about financing new projects."

He offers a caveat, though, for what he says are high-caliber projects like Cisterra's Ritz Carlton development, located near both Petco Park and the Gaslamp Quarter.

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"If you're in the best location with the best operator, you probably have a better chance at being financed," he said. "In general, you'll have to come up with more equity because the banks are not going to be as interested in putting in a lot of debt. They'll say we want to limit our exposure, and so you, Mr. Developer, you have to put in more equity, and that's where the deals far apart."

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