The Ritz-Carlton, Laguna Niguel could see a new owner if the Dana Point luxury resort’s parent company follows through with plans to sell some or all of its properties.
Strategic Hotels & Resorts Inc., a Chicago-based real estate investment trust that owns the Ritz-Carlton, is said to be exploring plans for a sale, according to national and trade reports.
Properties
The company owns 18 high-end hotel properties in the U.S. and Europe, which have an estimated combined value of about $3.5 billion.
The 396-room Ritz-Carlton, Laguna Niguel, located on a 150-foot bluff overlooking the Pacific Ocean, is the company’s only Orange County hotel.
National reports cited the company hiring investment bank Eastdil Secured to market its portfolio. A potential sale is still in the early stages, and no official marketing package had reportedly been offered to potential buyers as of mid-June.
A deal for the Dana Point property would likely be the most expensive sale of an OC hotel since the last time the Ritz-Carlton saw a change in ownership.
Strategic Hotels bought the Ritz-Carlton from a privately held predecessor company in 2006 for $327.7 million, plus the assumption of $8.6 million in debt.
That deal valued the Ritz-Carlton, Laguna Niguel at nearly $850,000 per room.
It’s one of two Ritz-Carltons in Strategic Hotels’ portfolio, along with a 261-room location in Half Moon Bay in Northern California. The company also owns four Four Seasons hotels, among other properties.
Other properties in California it owns outright or through partnerships are the Westin St. Francis in San Francisco, Hotel del Coronado in San Diego, and the Hyatt Regency La Jolla.
It’s unknown whether the company would consider selling individual properties or if it is focused on a sale of its entire company, which national reports suggest could draw interest from large private equity companies, as well as sovereign-wealth funds.
Large stockholders of the company are encouraging Strategic Hotels to sell all of its properties.
“The best alternative to maximize shareholder value is for a sale of all the company’s assets,” New York-based investment firm Orange Capital said in a statement.
“There is a large pool of well-capitalized buyers for the company’s luxury hotels,” said Orange Capital, which owns about 3.65% of Strategic Hotel’s stock.
The real estate investment trust has a market value of about $1.8 billion and about $1.3 billion of debt tied to its properties.
Doing Better
The Ritz-Carlton, Laguna Niguel appears to have rebounded from the worst days of the last recession and is performing at levels close to what was seen the last time the hotel traded hands, based on a reading of the company’s financial statements.
The hotel ended last year with an average occupancy rate of 63.5% and an average daily rate of $376.81. In 2006 it had an average occupancy rate of 71% and a daily rate of $381.04.
Revenue per available room, a measure of performance for hotels also known as RevPar, stood at $239 for the Ritz-Carlton at the end of 2012, up nearly 16% from a year earlier.
Total RevPar—which also factors in food, beverage and other hotel operating revenue, along with a hotel’s daily rates—was nearly $513 at the end of 2012, up 14.6% from year-ago levels, according to regulatory filings.
The year-over-year increases at the Ritz-Carlton, Laguna Niguel were largely a result of higher group occupancy, according to the company’s latest annual report.
The property has long been home to Newport Beach-based investment bank Roth Capital Partners’ annual conference, among other events.
The hotel opened in 1984. It was acquired by Strategic’s predecessor company in 1997 from Prudential Financial Inc. as part of a five-hotel deal.
The company completed a $40 million renovation in 2005 that included the addition of a full-service spa. Planned upgrades to the property’s guestrooms are currently in the works, according to a recent company presentation.
The highest price paid for a local hotel in the past few years was $235 million, when Seattle-based Washington Real Estate Holdings LLC took over the nearby St. Regis Monarch Beach Resort in Dana Point following that property’s well-publicized financial issues.
Washington Real Estate, which previously held debt tied to the St. Regis, considered selling the 400-room Dana Point property in 2011 but did not complete a deal that was expected be closer to $290 million.
The St. Regis was valued at nearly $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 (see story, page 5).
