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Strategic Hotels & Resorts owns 100%

Hotel del Coronado ownership consolidation tops transactions here

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The most expensive hotel transaction in California, during the year's first half, was Strategic Hotels & Resorts' May acquisition of the 63.6 percent interest in the 757-room Hotel del Coronado it did not already own, Atlas Hospitality Group reported.

Under the accord, Strategic -- which acquired the interest from a Blackstone Group (NYSE: BX) entity -- paid $210 million in cash and assumed $475 million in mortgage debt.

Bloomberg News noted at the time that the transaction excluded $18 million in cash that Strategic had invested in the venture prior, to this latest transaction.

Atlas Hospitality reported that based on a gross valuation of $787 million plus the $18 million translates to an $805 million overall value for the hotel.

Atlas then multiplied $805 million by the 63.6 percent stake to arrive at the $512 million effective price Strategic paid to regain its 100 percent stake in the hotel.

Blackstone had bailed out the hotel by buying the majority stake in 2011, before the Hotel Del was to default on more than $600 million in debt.

The Atlas Hospitality Group reported that the largest hotel transaction it tracked in the state, in terms of the number of rooms (956), was that of the Town & Country Resort & Convention Center in Mission Valley.

The Town & Country transaction last June, rather than being a true sale, was instead the formation of a three-way joint venture partnership with long-time property owner Atlas Hotels (no connection with Atlas Hospitality Group); Lowe Enterprises (which once co-owned the Hotel del Coronado); and Aecom Capital, the investment fund of Aecom Technology Corp. (NYSE: ACM).

Atlas Hotels has been headed for decades by company President Terry Brown, whose father, the late Charlie Brown, founded the hotel in 1953.

While the terms of the transaction that resulted in the three-way partnership were not disclosed, Starwood Property Trust of Greenwich, Conn., provided a $62.2 million loan.

These funds are intended to upgrade the property that is now being managed by Destination Hotels & Resorts.

Destination, which is Lowe's hotel management subsidiary, also manages the Paradise Point Resort & Spa on Mission Bay and L'Auberge del Mar in Del Mar.

Along with the unusual transactions, the 193-room Hyatt House at 10044 Pacific Mesa Blvd. in Sorrento Mesa was sold for $31.05 million in March, as part of a 10-property, $313 million portfolio deal. The buyer was RLJ Lodging Trust (NYSE: RLJ). The seller was Hyatt Hotels Corp. (NYSE: H).

Including the Hotel del Coronado, the Town & Country and the Hyatt House, Atlas Hospitality reported on the transactions of 19 hotels through the year's first half. This was a slight dip from 21 such transactions during the first half of 2013.

The median price of a hotel property sold in the county during the year's first half was $6.5 million -- up about 4.84 percent from the $6.2 million figure recorded in the first half of last year.

While the hotels' median price climbed somewhat, the median price per room dropped about 26.15 percent from $101,833 in the first half of last year to $75,207 as of June 30 2014.

While the main problem for hotel brokers has been finding enough good properties to sell, Reay said "sales have been very robust."

"They are up where they were [before the recession]," he said.

Reay said that a slowdown in the number of potential transactions may be in the offing, but added the market here should remain strong.

San Diego's totals may not be the state's strongest -- some Northern California areas had better performances -- but this county stacks up well when compared with other parts of Southern California.

Los Angeles County only had one more hotel transaction (20) than San Diego County had during the first half of the year, and the median price of a hotel in that market was $3.18 million -- or less than half the median here.

The median price per room was $72,476 last month in the L.A. area, just slightly more than in San Diego.

While Atlas Hospitality didn't include the Town & Country transaction in its dollar volume total, Strategic Hotels' acquisition of the Hotel Del was the major factor in the $701.08 million sales volume during the year's first half.

This was off about 5.79 percent from $744.19 million recorded in the same period last year.

If the Hotel Del is dropped out of the equation, however, the mid-year total drops to $189 million, a fraction of last year's mid-year total.

The next largest half-year transaction was the $316 million sale of the 400-room St. Regis Monarch Beach resort, located in Orange County, to KSL Capital Partners.

That property went through a foreclosure in 2009, following a default on a $70 million mezzanine loan, but has rebounded smartly as evidenced by its high sales price.

"We continue to see a very active hotel sales market in California, and the signs point for this to continue in to 2015," Reay said.

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Hotel del Coronado

Company Website

1500 Orange Ave.
Coronado, CA 92118

Hotel del Coronado Executive(s):

Donna Gonser

  • Manager

Bob Antes

  • Chief Financial Officer

Barry Brown

  • Director of Sales

Andre Zotoff

  • General Manager, Vice President