The up-and-down valuation of the swanky Monarch Beach Resort in Dana Point over its 17-year history has apparently hit a new high, based on documents related to a new loan for the 400-room resort.
KSL Capital Partners LLC, a Denver-based private equity firm that bought the property in mid-2014 when it was the St. Regis Monarch Beach Resort, recently completed a $340 million refinancing for it. The refinancing consists of a $238 million loan originated by JPMorgan Chase & Co. and Barclays Bank and a $102 mezzanine loan from an undisclosed lender, according to documents from Fitch Ratings.
The $238 million senior mortgage is being packaged as a two-year, single-asset commercial mortgage-backed securities loan with five one-year extension options.
Investors in the loan will earn a floating interest 2.07% above Libor, according to Fitch’s review of the offering.
KSL Capital is using proceeds “to refinance existing debt of approximately $225 million, fund capital reserves, pay closing costs and return equity to the sponsor,” according to Fitch.
The report indicates the resort was recently appraised by Westbury, N.Y.-based HVS Consulting & Valuation, which put a $466.4 million value on it, or just under $1.2 million per room.
KSL Capital paid a reported $316.9 million for the property in 2014, or $792,250 per room.
Excluding portfolio sales, the only Orange County resort that’s sold at a confirmed per-room price above $1.2 million is the 250-room Montage Laguna Beach, which traded for $360 million in 2015, or a little more than $1.4 million a room.
Recession Victim
The 2014 valuation of the resort already marked a notable post-recession upswing in value.
It was built in 2001 by Newport Beach-based Makar Properties LLC and is one of four Five Diamond resorts in Orange County, along with the Montage, the Ritz-Carlton Laguna Niguel, and the Resort at Pelican Hill, according to the American Automobile Association.
The resort was valued at nearly $375 million in 2007 when it was refinanced by Makar and its financial partner, San Francisco hedge fund investor Farallon Capital Management LLC.
Soon after, it 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, which was held shortly after AIG’s bailout, spurred other business groups to meet elsewhere because they didn’t want to be associated with the lavish meeting, which angered taxpayers and government officials alike.
In 2009, lenders initiated foreclosure proceedings against Makar Properties and Farallon, which turned over ownership of the property that summer when its 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.
KSL bought the resort from Washington Real Estate, dropped the St. Regis brand, and instituted other changes at the 15-acre property.
The owners have spent an additional $47.6 million upgrading it, according to Fitch’s report, including $10.7 million spent on guestrooms, $9.5 million in pool and lawn renovations, $8.4 million on the restaurants and bars, and $5.9 million on the spa and retail outlets.
The property includes the Miraval Spa, three swimming pools, eight ocean-view restaurants, 110,000 square feet of meetings space, and amenities that include the Monarch Beach Golf Club and a beach club.
Occupancy Upswing
The Monarch now averages about 64% occupancy, up from 60.4% in 2015, according to Fitch’s data. Group travel represents about 64% of guests.
Average daily rates are about $396, up from about $340 in 2015.
The resort brings in nearly $100 million in revenue per year, $41 million of that from food and beverage services, the report said.
It employs about 670 full time on average, peaking at about 1,000 during busier summer months.
