Distress specialist buys Santa Barbara hotel

UPDATED, Jan. 20, 2022, 11:38 a.m.: An investment firm focused on distressed hotels has purchased a 158-key hotel just outside Santa Barbara at a discount.

New York-based AWH Partners bought the Kimpton Goodland at 5650 Calle Real in Goleta, the firm announced on Thursday. The firm purchased the property for $33 million, or $209,000 per room, sources familiar with the deal told TRD.

Newport Beach-based Makar Properties – a firm founded by chief executive Paul Makaracian along with his father, Hadi Makarechian, a longtime real estate investor and member of the University of California system’s Board of Regents – bought the property in 2013 for $24 million. It had been a Holiday Inn, and Makar Properties reopened it as The Kimpton Goodland in 2014.

Private equity firm KHP Capital Partners then bought the property in 2015 for $57 million, according to a source familiar with the KHP deal.

Sources told TRD AWH Partners acquired the property from the mezzanine lender on property, after the borrower went into default.

“Parties in the hotel’s capital structure approached AWH for assistance in resolving challenges stemming from COVID-19,” the firm said in a statement.

AWH is planning to renovate and rebrand the hotel and will take over management through its wholly-owned firm Spire Hospitality.

The pandemic has spurred a number of hotel-related defaults, given travel restrictions and low hotel occupancy levels from 2020 through some of last year. At the beginning of 2021, hotel owners were walking away from their properties and handing keys over to lenders, though not all lenders were keen to hold onto struggling hotels.

AWH, which acquired most of its portfolio in the aftermath of the global financial crisis in 2008, has taken advantage of defaulting hotels.

The investment firm acquired four other properties in 2021: the 189-key Villa Florence hotel near Union Square in San Francisco, a 461-key DoubleTree by Hilton property in Anaheim, the 145-key Hilton Garden Inn in Fremont Milpitas and a 179-key Hilton Garden Inn in Portland.

AWH spent around $100 million in equity on these purchases, partnering with various institutional investors.

And AWH still has an eye out for future distressed or struggling hotels.

Over the next one to two years, AWH co-founder Russell Flicker is expecting to see more opportunities arise especially “from hotels that haven’t received enough capital and haven’t right-sized their capital stack” as debt starts to mature and hotel occupancy starts to increase, he told TRD.

This story has been updated to reflect the correct price KHP Capital Partners bought the property for in 2015. KHP bought the property for $57 million, not $41 million.