The sale of the iconic Hotel Laguna to a group of prominent Orange County business executives and community leaders is being challenged in court by the Laguna Beach hotel’s operators, who claim they were illegally deprived of the opportunity to buy the 65-room property.
Andersen Hotels Inc., a Laguna Beach-based firm that’s operated Hotel Laguna for more than 30 years, filed a complaint this month in U.S. District Court that alleges breach of contract and fraud against longtime owner Porterville-based E.W. Merritt Farms related to its dealings with a group of locals now “marketing themselves as the new ‘owners’ of Hotel Laguna,” court documents show.
The new ownership group, the complaint said, includes two area executives with ties to the real estate community, Joe Hanauer and James ‘Walkie’ Ray, and Laguna Beach filmmaker Greg MacGillivray. They’re also listed as defendants in the case.
Members of the group serve on a number of area arts and conservancy-related boards, and have been part of the revitalization of several other well-known buildings in Laguna Beach, suggesting a major refurbishment of Hotel Laguna could be in the works, though no plans have been disclosed.
It’s unclear whether the hotel sale has been finalized; there are no brokerage data or property records reflecting it, or public records showing what the new group paid for Hotel Laguna.
Attempts last week to reach the defendants listed in the lawsuit for comment were unsuccessful, and the defendants hadn’t responded to the allegations in court filings as of last week.
Andersen Hotel’s complaint alleges that the new owners, rather than buying the hotel outright, may have agreed to operate it under a 99-year lease. That structure “is legally equivalent to a sale,” the company argues in its complaint, which was filed on Oct. 15. The purported long-term lease was structured that way to deprive Andersen Hotels of its own “contractual right of first refusal” to buy the property if a sale were to occur, according to the complaint.
City’s Oldest Hotel
Hotel Laguna is next to the Main Beach Park on South Coast Highway in the heart of downtown Laguna.
It’s one of the oldest and best-known buildings in the city, its roots dating to the 1880s, though its current structure was reportedly built in about 1930.
The property includes restaurants, meeting space and wedding facilities; it’s one of the few Orange County hotels that’s still been able to hold wedding ceremonies on the beach in recent years.
Claes Andersen purchased the hotel operating lease in 1985, soon after moving from Denmark, according to local news reports. He died in 2010; his son, Stefan, was appointed general manager two years ago.
E.W. Merritt Farms has owned the hotel since 1973.
The family is unsure it would exercise its right of first refusal to buy the hotel, largely because it’s been unable to determine the terms E.W. Merritt agreed upon with the other investment group, said Proud Usahacharoenporn, a senior associate with the Costa Mesa office of Rutan & Tucker, which is representing the plaintiff in the case.
“We don’t know what the offer was,” she said. “The hotel wants to know what’s going on.”
Plans for updating the property have been put on hiatus due the uncertainly over the hotel’s ownership, and the plaintiff “has already had to turn away hundreds of banquet and wedding venue inquiries and cannot even take room reservations,” the lawsuit said.
State employment records filed on Oct. 12 show that the hotel intends to let go of 121 workers in mid-December as part of a “permanent closure.”
It’s unknown whether the filing was made by Andersen Hotels or the new ownership group. Hotels that experience changes in management or brand affiliation often file similar employment filings with the state; employees are typically hired back by the new owners.
Local Ties
The group now advertising itself as the new ownership has numerous business and philanthropic ties to the community.
MacGillivray, a famed IMAX documentary movie director and Laguna Beach resident, has served on the board of Orange County Great Park, the Laguna Playhouse and Laguna Art Museum.
Ray, co-founder of Irvine-based Sanderson J. Ray Development, has also served on the Great Park board and its conservancy arm and has been involved with MacGillivray’s One World One Ocean Foundation, which aims to restore the health of the ocean.
Hanauer, principal at Laguna Beach-based Combined Investments LLC and former head of Coldwell Banker’s Residential Group, has served on the Laguna Playhouse board and helped revitalize a number of other prominent buildings in the city, including the Old Pottery Place and 580 Broadway.
