If the foreclosure proceedings faced by the St. Regis Monarch Beach Resort in 2009 was Orange County’s most notorious illustration of the last real estate crash, then May’s low-key sale of the posh resort represents a quiet but clear comeback for the high end of the hospitality industry here.
KSL Capital Partners LLC, a Denver-based private equity firm, last month snapped up the 400-room St. Regis, one of Orange County’s best-known resorts, on undisclosed terms.
The Dana Point property will continue to be managed by Starwood Hotels & Resorts under the St. Regis brand, according to the buyers, who also own Dallas-based ClubCorp Holdings Inc., which operates the Center Club in Costa Mesa and the Coto de Caza Country Club, among other area properties.
Sources familiar with the sale put the price tag for the St. Regis at about $800,000 per room, or $320 million.
In comparison, 13 OC hotels that traded hands last year—ranging from less-glamorous establishments to midtier properties—went for an average per-room price of about $113,000, according to data from Irvine-based consultancy Atlas Hospitality Group.
The St. Regis deal is believed to be the most expensive real estate sale in Orange County so far this year and is the latest sign of improving financial results for the area’s upscale hotel properties.
“There’s no question that the luxury market is the best-performing (hospitality) sector right now” in terms of daily rates, occupancy rates, and sale prices, said Alan Reay, president of Atlas Hospitality.
Occupancy, Average Daily Rates
Occupancy rates at other Orange County resorts have increased from about 63.5% to 67% over the past year, while average daily rates have increased nearly 6% over that time, according to regulatory filings by the publicly traded owner of the Ritz-Carlton, Laguna Niguel.
The sale of the St. Regis was one of two headline-making luxury hotel transactions in Southern California in late May.
Chicago-based Strategic Hotels & Resorts Inc. said it would buy the 63.6% stake it didn’t already own in the Hotel del Coronado on the San Diego waterfront for $210 million. The deal is expected to close this quarter.
Strategic, which also owns the Ritz-Carlton, Laguna Niguel, bought its initial stake in the del Coronado in 2006. Its deal for the 63.6% stake that had been held by a unit of Blackstone Group in New York includes the assumption of $475 million in debt for the 757-room resort. The transaction values the Coronado at $787 million, or a little more than $1 million per room.
It remains to be seen whether that return for a comparable property means KSL Capital got a deal for the St. Regis.
Reay said the del Coronado’s iconic status, plus its beachfront location, likely inflated its value, even though the St. Regis is larger and boasts amenities such as the Monarch Beach Golf Club.
The 169-acre St. Regis property—which also includes a spa, three swimming pools, and six ocean-view restaurants—has been on a wild ride over the past seven years in terms of its valuation.
It was valued at close to $375 million in 2007 when it was refinanced by its owners at the time, Newport Beach-based Makar Properties LLC and San Francisco hedge fund investor Farallon Capital Management LLC.
AIG
The resort soon began to feel the effects of the downturn and suffered a dented public image after a controversial meeting held there in 2008 by American International Group Inc., the government-owned insurer. The shadow of the event, occurring shortly after AIG’s bailout, spurred other business groups to meet elsewhere because they didn’t want to be associated with AIG’s lavish event, which angered taxpayers and government officials alike.
Lenders initiated foreclosure proceedings in early 2009 against Makar Properties and Farallon, which turned over ownership of the property that summer when the property’s estimated value had fallen to about $150 million.
Seattle-based Washington Real Estate Holdings LLC, which had owned some of the debt tied to the St. Regis, took over the property in 2010 in a deal valued at about $235 million, or about $588,000 per room.
The resort was put on the sales block several times since then at prices approaching $300 million. Bethesda, Md.-based Host Hotels & Resorts was close to purchasing the property in 2011 but opted against completing the deal.
