Harvey Hanna acquires Rehoboth motel for $13M

The Sandcastle Motel, a 60-room hotel just blocks from the Boardwalk, is the latest acquisition of Harvey, Hanna & Associates. | DBT PHOTO BY JACOB OWENS

REHOBOTH BEACH — Harvey, Hanna & Associates recently bought the Sandcastle Motel in downtown Rehoboth Beach, marking the city’s largest sale this year.

The 60-unit resort mainstay on Second Street adjacent to the Conch Island restaurant and bar was sold for $13.2 million to a HHA subsidiary on Nov. 29, according to Sussex County land records. The commercial development firm also manages nine hotels through its hotel management arm, TKo Hospitality.

Neither HHA nor TKo Hospitality representatives responded to calls for comment.

The Sandcastle Motel at 123 Second St. was opened by former Rehoboth Beach Commissioner Don Derrickson in 1986, according to the Cape Gazette. Its location made it a popular place to stay because it was a quick walk to the beach and the boardwalk. The timing was perfect, as Rehoboth Beach had started to embrace the nightlife culture with more restaurants and bars opening for business downtown.

The motel became family-owned by 2007, when Derrickson transferred ownership to Five D Limited Liability Company. Property records show that the company is a partnership between Derrickson, his wife, Dianne, and their sons, Regan, Spencer and Bryan.

The sons opened Conch Island on a connecting venue facing Rehoboth Avenue a few years later, according to the Cape Gazette. The restaurant and bar will also close following a closing party on Feb. 25 and 26, according to a Facebook post. The Conch Island has secured temporary space right at the entrance to downtown Rehoboth.

HHA is a commercial real estate development company with 3.5 million square feet of industrial, office and hospitality real estate in the Mid-Atlantic region. One of its biggest projects was redeveloping the long-dormant General Motors plant in Newport, which later became one of Amazon’s largest facilities to date.

In 2015, HHA announced it would make a concerted effort to tap into the restaurant and hospitality sector with TKo Hospitality. Top names at TKo include former Meyer Jabara Hotels executive Kostas Kolgeropouls as CEO and president, hotel management veteran Vince DiFonzo as chief operating officer and E. Thomas Harvey III as chairman.

TKo currently operates nine hotels, including Hyatt brands in Dewey Beach, Newark, Ocean City, Md., and Allentown and Chadds Ford, Pa. Other assets include Dewey Beach’s The Lighthouse restaurant and bar, Lighthouse Cove event center, Surf Club Oceanfront Hotel and more.

Last year, TKo announced it would build two new Hyatt hotels in Delmarva in the next two years. The company opened the Hyatt House in Lewes earlier this year and plans to open the Hyatt Place in the Kent Narrows, Md.

The $13.5 million sale equates to a per unit rate of more than $225,000, marking the largest sale in downtown Rehoboth this year. Grotto Pizza bought the Dolle’s storefront for $6.2 million in February, while 330 Rehoboth Ave. was sold to a hotel developer for $4.2 million the same month.

In August, New York-based hospitality investment firm bought two Bethany Beach hotels for a combined $44 million.