Terra Cotta Inn, Famous Nude Resort, is For Sale

Nudist resort has seen change
Terra Cotta Inn still on the market

Marilyn Chung, The Desert Sun

Tom Mulhall, owner of the Terra Cotta Inn, welcomes new guests Susanne and Jim Shepard of Fontana.

Before it was the Terra Cotta Inn - and long before it went clothing-optional - the hotel at 2388 E. Racquet Club Road in Palm Springs was known as The Monkey Tree.

Opened in 1960, it is reported to have played host to celebrities like President John F. Kennedy, Marilyn Monroe, Lucille Ball and Desi Arnaz, Spencer Tracy and Katharine Hepburn, and members of Frank Sinatra's Rat Pack.

In 1988, the resort was bought by an Orange County businessman and renamed The Legacy.

It was purchased in 1994 by Tom and Mary Clare Mulhall, who renamed it the Terra Cotta and offered it up as a clothing-optional resort, one of a handful of such places in the valley with an international clientele. The property has been listed for sale for about the past year, with an asking price of $2.6 million.

The 17-room hotel features Palm Springs' now celebrated mid-century modern design by architect Albert Frey.

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The Terra Cotta Inn has been up for sale for the past year. But its current owners are not anxious to part with what is a small piece of Palm Springs history - and still generating steady business among the valley's niche clothing-optional resorts.
"It's one of those things where we're not itching to sell, but if someone made us an offer we couldn't refuse, then I would sell," said Tom Mulhall, who opened the Terra Cotta with wife Mary Clare in 1994.

Right now, that unrefusable offer would be around $2.6 million - the Mulhalls' asking price for the 17-room hotel at 2388 E. Racquet Club Road.

The owners insist that's not just naked greed. Tom Mulhall said the inn consistently has at least a 75 percent rate-of-return business - much of it from international travelers who first heard about the hotel from the numerous publications around the globe that have spotlighted it.

Mulhall added the inn is nearly full throughout the year and consistently generates more than $70,000 annually in transient occupancy taxes for the city.

And the asking price is set at just around three times the hotel's annual revenues, which would be more than $800,000.

In their early 50s, neither of the Mulhalls is actually ready to stop working. But when it comes time to sell, Tom said he would like to see the inn rest in the right hands - with someone who will look to preserve what makes the property unique.

The resort was not clothing-optional when it opened in 1960 as the The Monkey Tree. But legend has it that it quickly became a popular and secluded getaway spot for political and Hollywood royalty.

It is reported to have played host at various times to John F. Kennedy, Marilyn Monroe, Spencer Tracy and Katharine Hepburn, as well as members of The Beatles and Frank Sinatra's Rat Pack.


What also set it apart was its distinct design by noted architect Albert Frey, who made his name in the Palm Springs area with several buildings constructed in the now celebrated mid-century modern style.
The Monkey Tree had ceased to exist by 1988, when it was purchased by an Orange County businessman who changed its name and operated it for a while as The Legacy.

Shortly after the Mulhalls bought it in 1994 and reopened it as Terra Cotta, they received a surprise visit from the master architect himself. Frey, by that time in his early 90s, liked what had become of his creation.

"He had traveled to nude bathing resorts in Europe when he was young," Tom Mulhall recalled. "He loved what we had done with the place - he definitely approved."

Though the Terra Cotta hasn't yet snagged its asking price, some local experts say it is not unusual for the valley's smaller vintage hotels, particularly around downtown Palm Springs, to fetch premium prices.

The market is not like it was during the valley's frenzied real estate climate of early 2004 - when about a dozen local small hotels sold for prices two and three times their previous purchase prices .

But experts contend smaller hotels are still attractive to investors.

About a decade ago, the rule of thumb was that local small hotels could be sold for around $30,000 per room. With valley real estate prices rising in recent years, several have sold for around $100,000 per room - especially vintage properties dating back to the 1950s and 1960s.

"Depending on the hotel, it's sometimes as much as $300,000 per room," said Char Sharp, an agent with commercial real estate firm Sperry Van Ness. Sharp is not representing Terra Cotta, but currently has about eight "boutique" hotel transactions in various stages of completion, mostly in Palm Springs.

She said those kinds of hotels - usually under 50 rooms and offering more personalized services than chain hotels - have become popular with buyers looking to make transitions in life.

"Some people are buying them for a change in lifestyle, and some people want to run a hotel as a way to change careers," Sharp said.

Source: http://www.thedesertsun.com/apps/pbcs.dll/article?AID=/20060625/BUSINESS01/606250311/1003/business

See www.sunnyfun.com for Terra Cotta's website.