Hotel REIT Sunstone Hotel Investors Inc. in Aliso Viejo sold Fairmont Newport Beach for $125 million.
The buyer wasn’t disclosed but it’s believed to be a China-based entity affiliated with Infinity Realty Advisors in Los Angeles.
The Business Journal first reported in late January that the Fairmont was nearing a sale.
The $125 million works out to about $282,000 per room for the 444-rooom property, which is a few blocks from John Wayne Airport.
The price is 16 times the hotel’s 2016 adjusted earnings before interest, taxes, depreciation and amortization of $7.8 million and represents a 5.2% capitalization rate on its net operating income.
Sunstone bought the hotel in 2005 for $72 million, purchased the underlying land in 2014 for $11 million and, according to its latest annual report, had spent about $34 million on upgrades.
The deal gives them “an estimated net book gain of approximately $44 million and is estimated to increase 2017 taxable income by approximately $37 million,” Sunstone said in a statement.
Chief Investment Officer Robert Springer said in the statement the deal closed at an “attractive valuation” and “reduces near-term capital needs.”
Fairmont last year produced revenue per available room 25% below the company’s portfolio average, he said, which could point to upside potential for the buyer.
Sunstone has stakes in 27 hotels with 13,225 rooms. It traded recently at a $3.3 billion market cap.
Eastdil Secured LLC, which keeps an office in Irvine, advised Sunstone on the sale.