May 31--Pala Mesa Resort has been sold to East Coast investors who have pledged to pump as much as $9 million into the 250-acre property alongside Interstate 15 in Fallbrook. 

"Right now it is a magnificent golf course with hotel rooms" said John Cullen, president of Chesapeake Hotel Group, one of two new owners. "We just need to turn it into a world class resort in the next 18 months." 

Annapolis-based Chesapeake and Greenfield Partners, a real estate investment fund, acquired Pala Mesa and its 18-hole championship golf course in a $15 million cash deal that closed late last week. 

The sales price is the same as what Triple Tree Corp. paid the 133-room resort three years ago. 

Cullen plans a major makeover for the 37-year-old resort, including a new clubhouse, expanded meeting facilities and restaurant. 

When the improvements are completed, he said, Pala Mesa will be a step above Temecula Creek Inn, a golf resort in Temecula, and on par with Rancho Bernardo Inn. Both inns are owned by JC Resorts. 

"We want to be a four-star and four-diamond resort within two years," Cullen said. 

The acquisition is a homecoming of sorts for Cullen, who purchased a stake in the U.S. Grant hotel in downtown San Diego in the middle of a recession in 1992 and sold it six years later in one of his more lucrative deals. 

He expects the next two years to be a tough period for California hotel operators. A sluggish economy is stifling business spending, it is hard to find good workers and increased utility costs are eating into the bottom line and eroding sales prices. 

If hotels typically sell for 10 times earnings, he said, then a $250,000 annual increase in utility bills means a property like Pala Mesa would sell for $2.5 million less. 

"The hotel market in Southern California has slowed down this year," said Jordan Richman, senior vice president in the West Los Angeles office of Grubb & Ellis. "There haven't been many super sales." 

Cullen has brought in about a half-dozen executives from the U.S. Grant to manage Pala Mesa. They replace Outrigger Lodging Services, an Encino-based firm that had managed the resort. 

The resort has 168 employees who cater to clientele primarily from Los Angeles and San Diego counties. 

Cullen expects the resort's work force to grow as Pala Mesa expands. 

Chesapeake owns stakes in hotels and resorts in Rhode Island and Colorado and is looking at a property in Hawaii. 

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(c) 2001, The Press-Enterprise, Riverside, Calif. Distributed by Knight Ridder/Tribune Business News. GBE,