Strategic Hotels & Resorts acquired the 250-room Pacific Ocean-facing Montage Laguna Beach luxury resort in Laguna Beach, California from an affiliate of Ohana Real Estate Investors for $360m.
As part of the deal the firm assumed a $150m fixed-rate mortgage loan from Mass Mutual Life, priced at 3.9% and maturing in August 2021.
The rest of the purchase was funded with existing cash balances and through the issuance of 7,347,539 shares of common stock to an affiliated designee of the seller, priced at $13.61 per share, or $100m.
Last June the firm acquired Blackstone’s stake in the luxury Hotel del Coronado near San Diego and also counts the Ritz-Carlton Half Moon Bay (in Half Moon Bay, California) among its holdings. Strong hotel fundamentals have backed the firm’s push into the resort space.
Raymond Gellein, chairman and CEO of Strategic Hotels & Resorts, in a statement called the opportunity to acquire a hotel of Montage’s caliber “exceptionally rare.”
“The Southern California market generally, and the coastal Orange County market specifically, have been among the highest rated markets in the country and are poised to continue their strong growth given the diverse set of demand drivers and no competitive supply in the current pipeline as the result of extremely high barriers to entry,” he said.
Whereas a RevPAR “penetration index” of 100 means a hotel is capturing a fair share compared to its competitors in a certain segment of the hotel industry, in this case Southern California’s leading resorts, Gellein put the Montage’s trailing twelve month index at 185.
Montage Hotels & Resorts will continue to manage the resort, which is situated on approximately 30-acres of land atop a 50-foot bluff overlooking the Pacific Ocean. Opened in 2003, the hotel features 60 suites, 16,000 sq ft of indoor meeting space and a 20,000 sq ft spa.