The Orange County Register
12/04/19

Dana Point’s Five-star Monarch Beach Resort Sold for $497 Million
By Jonathan Lansner

Dana Point’s five-star Monarch Beach Resort sold for $497 million

The five-star Monarch Beach Resort in Dana Point — where an average night will cost you $380— has changed ownership again, this time selling for nearly a half billion dollars.

American Banker reports that hotel specialists Ohana Real Estate Investors from Redwood City acquired to 400-room luxury hotel from Denver-based KSL Capital Partners in October for a reported $497 million. Ownership of the blufftop resort, across the Pacific Coast Highway from the Pacific Ocean, has taken some odd twists in its 18 years.

The Makarechian family spent upwards of $240 million on the property that opened in 2001 with under the “St. Regis brand.” In 2008, as the financial meltdown was in full boil, the hotel was the center of some ugly press when it hosted an executive retreat for American International Group Inc. just days after the insurer had gotten a federal bailout.

The resort’s owners then defaulted on $300 million of its loans in 2009 amid the Great Recession downturn in tourism. For a period, it seemed nobody wanted to own the resort.

In 2010, control of the resort was acquired by one of its debt holders, Washington Holdings of Seattle. At the time, the hotel’s value was seen as low as $100 million. KSL bought the property from Washington in 2014 for an estimated $317 million. KSL ended the St. Regis alliance in 2016.

The sale price suggests KSL did very well for itself in five years of ownership. American Banker noted KSL did put $56 million into renovations at the resort.

Ohana plans to put $32 million into upgrades at the resorts as well as putting the hotel under “a global luxury brand by 2021,” American Banker reports. The property has been 65% full at its average daily room rate of $380.

Ohana is no stranger to Southern California luxury hotels as it had had financial or operational ties to many local resorts, including Orange County’s Montage Laguna Beach and the Ritz-Carlton Laguna Niguel.

Southern California hotel investors switch gears in 2019’s first half. According to Atlas Hospitality Group, 56 local hotels were bought in the first half vs. 41 in 2018. But the average hotel sold had only 68 rooms this year vs. 104 in ’18. That helps explain why the price per room paid locally was on average 22% lower this year.