The Newport Beach Marriott Hotel & Spa near Fashion Island has sold for $216 million, in the largest hotel deal in the state so far this year.
Eagle Four Partners, a Newport Beach-based investor with several other hospitality properties nearby, late last week said it bought the 532-room property—Orange County’s eighth-largest hotel by room count—which sits on the western edge of Newport Center, just off Santa Barbara Dr.
It’s partner in the deal is Newport Beach’s Lyon Living, the apartment investor and developer founded by the late Gen. William Lyon, which has been expanding its portfolio outside rental properties.
Bill H. Lyon, the son of Gen. Lyon and the former chief executive of William Lyon Homes, which was bought by Taylor Morrison Home Corp. earlier this year, has a stake in Lyon Living.
There’s no plans to add housing or apartments to the 10-acre hotel property, officials said.
The group bought the hotel from Bethesda, Md.-based Host Hotels & Resorts Inc. (NYSE: HST) for about $406,000 per key.
“This deal is likely to be the priciest to occur in 2020, and is especially notable at a time when hotel sales are down significantly over last year,” said Alan Reay, founder of Irvine-based hotel consultancy and brokerage Atlas Hospitality Group.
The sale marks the largest local hotel transaction in a year; 2019 saw the Monarch Beach Resort in Dana Point sell for a record price of nearly $493 million.
The Monarch resort, which has since been rebranded as a Waldorf Astoria property by new owners Ohana Real Estate Investors, sold for $1.2 million per key.
Marriott to Stay
The Newport Beach Marriott is located at 900 Newport Center Drive, adjacent to the Fashion Island shopping center.
The hotel is situated about a mile from the entrance to the Newport Beach Country Club, and overlooks the golf course. The country club is one of several city holdings for Eagle Four, which also owns the Balboa Bay Resort and Balboa Bay Club.
It bought the country club in 2012 and oversaw a major renovation of the property, whose entrance is along Coast Highway.
Outside of Newport Beach, notable properties it owns include Huntington Beach’s Paséa Hotel & Spa.
“It’s good synergy for the company,” said Reay of Eagle Four’s latest addition.
Expect a major renovation of the property, which will remain a Marriott, Eagle Four partner Kory Kramer told the Business Journal.
“We are dedicated to a transformative renovation in 2021 bringing the hotel to a new level of guest experience and service befitting its location in the heart of Newport Beach,” Kramer said.
Upgrades will include “a comprehensive renovation of both public space and guestrooms including exterior enhancements,” said Peter Zak, president and partner of Lyon Living Development Co.
Lyon Living and Eagle Four have worked together on other projects out of the state, Kramer said.
The hotel was last renovated in 2005, according to reports. That work topped $60 million, and added a spa, luxury suites, a new restaurant and upgraded the rooms and meeting space. It counts 32,000 square feet of indoor and outdoor meeting space.
“Newport Beach is our home. We are proud owners of the Balboa Bay Resort & Club and Newport Beach Country Club. Partnering with Newport Beach-based Lyon Living, we believe our group will transform the Newport Beach Marriott Hotel & Spa into a preeminent community asset for future generations,” said Kevin Martin, a partner at Eagle Four.
Impacted Pricing
Host is cashing out of the property after owning it on a long-term basis; the hotel originally opened by Bill Marriott in 1975 and was transferred over to Host when the company became its own entity.
The sale is the second one for the hotel owner in the third quarter, joining the sale of 29 acres of land next to its Phoenician hotel in Scottsdale for approximately $66 million.
Host last week said expects to record a gain of about $200 million in the fourth quarter for the combined sales.
“We are pleased to capitalize on these opportunistic sales at attractive prices that enhance our liquidity and reduce our near-term capital spending requirements,” Host said in a statement last week.
The deal comes as hotel operators struggle to maintain their bottom line as the industry is pummeled by the coronavirus pandemic (see story, page 3), and reflects a lower transaction price due to market impacts.
“It’s a lower number than we would have seen in 2019, which is understandable,” said Reay. “It’s a good purchase for Eagle Four in that it is well below replacement cost.”
Reay has noticed other real estate investment trusts aggressively shed assets to free up capital “as hotels closes and owners burn through cash.”
Busy Seller
Host last year sold the Newport Beach Marriott Bayview, located about three miles from the more recently sold Marriott at the tip of the city’s Back Bay, just off Jamboree Road.
Newport Beach-based Clearview Hotel Capital LLC bought the 254-room Marriott for $78 million, or $307,000 per room.
About a month after that sale, Host traded the 253-room Costa Mesa Marriott Suites as part of a three-property portfolio sale to Starwood Capital Group for $199 million.
Host has one Orange County hotel remaining in its portfolio: the 393-room Westin South Coast Plaza in Costa Mesa.
The sale is the only hotel deal in the state to top the $100 million mark this year.
In the last quarter, hotel transactions were down about 40% from the year prior, according to Atlas, but this slowdown is still not as significant as Reay and other industry players predicted.
“When the pandemic hit in March, I thought transactions would be at their lowest number in my 25 years of tracking sales, but that’s not going to be the case,” said Reay. “While we will see a lot fewer transactions in 2020, it won’t be anywhere near the low we saw in 2009.”
