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Thursday, Jun 13, 2024

Montage Moment

Billionaire Tillman Fertitta pays Nearly $650M For Laguna Beach Resort, Shattering OC Records

A multibillionaire with ties to Orange County has spent nearly $650 million to acquire the Montage Laguna Beach in a blockbuster hotel deal for the region.

Tilman Fertitta—who owns several high-end restaurants in Orange County through his Mastro’s and Morton’s brands, and whose extended family this year bought a $43 million Emerald Bay oceanfront home, and owns other area homes—has made his largest and most notable local investment to date through his purchase of the 259-room oceanfront resort.

“I have been traveling to Laguna Beach for over 30 years. It is one of my favorite places to visit and one of the most beautiful areas in the world,” Fertitta, whose wealth Forbes estimates to be $8 billion, said in a statement.

“The Montage is a stunning oceanfront property and one of the premier hotel brands in the world.”

Don’t expect a new name or any other major changes for the well-known Laguna Beach hotel along Coast Highway, which opened as the flagship Montage International property in 2003 and will continue to operate under the Montage brand under a long-term management agreement.

“We are thrilled that Tilman is the new owner of this one-of-a-kind property and welcome him into the Montage family,” said Montage Founder, CEO and Chairman Alan Fuerstman, whose company is based in Irvine.

Top Deal

China-based Dajia Insurance Group, which assumed the Montage as part of its 2019 takeover of Anbang Insurance Group, sold the hotel for nearly $2.5 million per key.

Property records indicate the resort sold for about $641 million, slightly below the reported $650 million price cited by others involved in the deal.

In addition to marking the priciest hotel sale for Orange County, the deal is the second priciest on record for the state, on a total and per-room basis.

The sale “shows how strong the market is for Orange County coastal trophy hotels,” Alan Reay, president of Irvine-based hotel brokerage Atlas Hospitality Group, told the Business Journal.

It bests the prior record-setting hotel sale for OC, when the Waldorf Astoria Monarch Beach—previously the Monarch Beach Resort—in Dana Point traded hands for nearly $500 million at the end of 2019, about four months prior to the onset of the pandemic.

Ohana Real Estate Investors LLC, which owned the Montage Laguna Beach between 2009 and 2015, is the new owner of the 400-room Waldorf Astoria.

That deal worked out to about $1.25 million per key, roughly half the value of this month’s Montage sale.

In 2020, Newport Beach’s Eagle Four Partners and Lyon Living paid $216 million, or about $406,000 per key, for the Vea Newport Beach. It was formerly the Newport Beach Marriott Hotel & Spa.

Earlier this year, Irvine Co. sold the 295-room Fashion Island Hotel to Eagle Four for $143.6 million, or about $487,000 per room. That hotel is being converted into the Pendry Newport Beach.

The Pendry brand is a boutique spinoff of the Montage that skews younger in terms of its typical customer.

Fuerstman’s son, Michael Fuerstman, heads that effort, which is expected to continue to grow at a faster clip than Montage in the coming years.

“There are more markets that better support the Pendry brand,” Michael Fuerstman previously told the Business Journal.

Hotel Portfolio

Fertitta acquired the property under his Fertitta Entertainment LLC brand; it’s just the latest ownership change for the Laguna Beach resort, whose last official sale was in 2015 for $360 million to Chicago-based Strategic Hotels & Resorts.

“Fertitta Entertainment LLC is committed to the success of the property and shares our ongoing commitment to the outstanding hospitality that the resort has delivered since opening in 2003,” Kacey Bruno, vice president of communications for Montage International, said in a statement provided to the Business Journal.

Current leadership, led by managing director and area general manager, Mary Rogers, will remain in place following the sale. Montage Laguna Beach employs about 620.

“The staff is thrilled to be working with Tilman,” Rogers said.

It’s not the first hotel venture for Fertitta; the Montage marks the 15th in the Texas-based businessman’s portfolio. In 2018, he developed the Post Oak Hotel at Uptown Houston, which became the state’s only Forbes Double Five-Star Hotel and Spa.

He also owns the San Luis Resort in Texas, and five Golden Nugget Casinos and Hotels.

Fertitta opened his first hotel, the Key Largo Hotel in Galveston, Texas, in 1985 at age 28. He later sold the hotel for $600,000 to his cousin Frank Fertitta.

Fertitta used the proceeds to acquire his first Landry restaurant and launch an expansion, ultimately raising $24 million in Landry’s first IPO in the early 1990s, reports indicate.

His purchase of the Montage—also a Forbes Triple Five-Star hotel—is not his largest investment to date.

He paid $2.2 billion for the NBA’s Houston Rockets in 2017, and also owns and operates more than 60 restaurant brands totaling 600 concepts nationwide. In California, this includes Catch Seafood and Catch Steak; Mastro’s Ocean Club and Mastro’s Steakhouse; Morton’s The Steakhouse; and Del Frisco’s Double Eagle Steakhouse, among others.

$521M Appraisal

The 30-acre Montage Laguna Beach includes the 20,000-square-foot Spa Montage, two pools, 20,000 square feet of indoor and outdoor meeting space, and direct beach access.

BofA Securities and Eastdil Secured began marketing the hotels in September; reports at the time indicated the hotel could sell for as much as $700 million.

The property was last appraised about a year ago when the owners refinanced the property in a $340 million loan transaction. It was valued around $521 million at the time.

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