Two boutique hotels along the Orange County coast—Pacific Edge Hotel in Laguna Beach and Shorebreak Hotel in Huntington Beach—are up for sale and expected to be among the region’s pricier hotel transactions of the year.
The 129-room Pacific Edge, which is owned by Westport, Conn.-based Westport Capital Partners LLC, was put up for sale earlier this month. The property is expected to fetch a sale price in the $70 million range, according to brokers with the hotel group of Jones Lang LaSalle, which has the listing for the hotel.
That would work out to an eye-popping $540,000-plus per room for the hotel, located about five blocks south of downtown Laguna Beach at 647 S. Coast Highway.
The last prominent OC hotel known to have traded hands for more than $500,000 per room was the St. Regis Monarch Beach in Dana Point, which sold for a reported $235 million, or about $588,000 per room, in a lender-driven deal in 2010. Last year, a deal to sell the St. Regis at an even higher price fell through.
Shorebreak
Also on the market is the Shorebreak, a 157-room and 39-suite hotel situated one block north of Main Street and the Huntington Beach pier. Los Angeles-based real estate investor and developer CIM Group opened the hotel about three years ago as part of its Strand mixed-use development at 5th Street and Pacific Coast Highway.
The asking price for the Shorebreak isn’t known.
Marketing documents show the Newport Beach-based hotels group of CBRE Group Inc. as having the listing for the property, but the brokerage declined to comment.
Word has it that CIM also could be looking to sell other portions of the Strand, which features about 100,000 square feet of retail and office space, but brokerage data show no such listing. The 3.5-acre mixed-use project was developed for a reported $90 million.
The Shorebreak and Pacific Edge hotels are managed by Joie de Vivre Hospitality of San Francisco, one of California’ s largest boutique hotel operators. They are the only two OC hotels run by Joie de Vivre.
Sources don’t expect Shorebreak to command a per-room price as high as what is being asked for the Pacific Edge, which is being marketed well above its last sale price, not to mention a per-room price few other Southern California hotels sold of late have seen.
Westport Capital paid close to $43 million, or about $333,000 per room, for the Pacific Edge in 2006.
Westport―whose other local properties include Mission Viejo’s Kaleidoscope shopping center, purchased in 2010 for $22 million―put in a reported $3.5 million in room upgrades and other improvements after it acquired the Pacific Edge.
The eight-building Pacific Edge was built in the 1950s and previously operated under the Vacation Village name. It has about 300 feet of beach frontage and some 4,500 square feet of meeting space, including a 4,000-square-foot private residence available for groups and events.
One of the restaurants at the hotel, the Beach House, was once the oceanfront home of Hollywood character actor Slim Summerville. The property also includes The Deck, a 116-seat oceanfront casual-dining restaurant that recently opened.
Bids on the Laguna Beach hotel are expected by late June, said John Strauss, managing director in the Los Angeles office of Jones Lang LaSalle, who has the listing along with colleague Tony Muscio. The brokerage is expecting a mix of local investors, private funds and real estate investment trusts, and international bidders to consider the property.
“We expect the hotel to garner a significant amount of interest from a variety of different investor profiles,” Strauss said.
He noted an improving local hospitality market, as well as a limited number of hotels in high-end coastal markets that have sold of late.
OC’s coastal hotels saw a 15% increase in revenue per available room last year, and occupancy rates have continued to increase in 2012, according to the brokerage’s data.
Infrequent Deals
Sales of coastal hotels in OC have been few and far between during the past two years. This month’s sale of Newport Beach’s Balboa Bay Club & Resort, which has 160 hotel rooms and several amenities, was the most prominent transaction over that time.
Irvine-based investors Eagle Four Partners and Pacific Hospitality Group LLC paid an undisclosed amount for the yacht club and its sister property, the Newport Beach Country Club.
The two properties were valued at nearly $175 million last year.
For sales of inland hotel properties over that span, per-room prices were far off the per-room price being asked for the Pacific Edge.
The 200-room Residence Inn Anaheim in Garden Grove, the most expensive OC hotel changing hands in 2011, last summer sold for $40.2 million, or about $201,000 per room.
The highest per-room price statewide last year was the 237-room Mondrian Los Angeles in West Hollywood, which traded hands for $137 million, or $578,059 per room, according to data from Irvine-based hotel consultancy Atlas Hospitality Group.
“They might be able to get their price, if they have the numbers and the income to justify (it),” Atlas Hospitality president Alan Reay said. “There’s a lot of buyer interest now.”
The Laguna Beach property also offers a new buyer “repositioning and development opportunities,” according to Jones Lang LaSalle.
Joie de Vivre took over management of the Pacific Edge in 2008. Brokers with Jones Lang LaSalle said the hotel is being offered unencumbered by brand and management.
