Eagle Four Partners has paid $216 million, or $406,105/room, for the 532-room Marriott hotel in Newport Beach, Calif.
The Newport Beach investment company bought the property from Host Hotels & Resorts Inc., a Bethesda, Md., REIT that had owned it since 1988.
The off-market deal, which closed on Monday, is the largest hotel transaction in California since the coronavirus pandemic began in March, according to Alan Reay, president of Atlas Hospitality Group, an Irvine, Calif., hotel-investment sales and research firm.
James Risoleo, Host’s chief executive and president, told analysts on a conference call today that the sales price resulted in a 6.8 percent capitalization rate, based on the net operating income the hotel generated last year.
“This was an opportunistic sale at (pre-Covid-19) pricing to a buyer that has strategic reasons to own the asset,” Risoleo said.
The hotel, at 900 Newport Center Drive, is across from the Newport Beach Country Club, which Eagle Four also owns. The company’s other holdings include the Balboa Bay Resort in Newport Beach as well as four other hotels in Orange County: the Pasea Hotel & Spa in Huntington Beach, Calif.; the DoubleTree in Irvine; the AC Hotel, also in Irvine; and the DoubleTree in Santa Ana, Calif.
The Marriott, along with the 393-room Westin South Coast Plaza in Costa Mesa, Calif., Host’s only other property in Orange County, generated $44.34 of revenue per available room during the third quarter, down from $171.54 during the same period a year ago.
For all of last year, the Marriott generated $160.30 of RevPAR, underperforming Host’s $179.22 portfolio average. The company owns 74 hotels in the United States, as well as five in Brazil and Canada.
Host last week also sold 29 acres of land at the 645-room Phoenician resort in Scottsdale, Ariz., for $66 million. The buyer, Replay Destinations of Vancouver, British Columbia, had acquired another parcel at the resort from Host for $17 million in the second quarter and plans on constructing 165 luxury residential condominium units and 85 single-family homes on the site. Residents will be able to buy an amenities package that will allow them to access the Phoenician’s restaurants, spa and golf course.
Host had acquired the Phoenician in 2015 for $400 million. Risoleo noted the resort has an additional 21.5 acres of land that the REIT could sell or use to expand the property.
“The sale of this land wasn’t in our underwriting when we acquired the hotel in 2015,” Risoleo said. “However, it was a part of our vision to unlock the tremendous value we saw in the Phoenician.”
The Marriott and Phoenician deals are the first sales this year for Host, which last year sold 14 hotels for nearly $1.3 billion at an average cap rate of 6.3 percent. The REIT has not bought any properties this year and only acquired one hotel last year, paying $610 million for the 429-room 1 Hotel South Beach in Miami Beach, Fla.
Risoleo expects that the REIT could purchase some hotels during the first half of next year as more properties hit the market, particularly by owners pressured to stay current on their indebtedness. Many lenders have allowed borrowers with hotels the ability to defer debt-service payments for periods of time. But they eventually have to make up any missed payments. Risoleo said that could result in opportunities. Some property owners, he noted, might not have “the liquidity or choose to not fund debt-service payments and other expenses,” which could result in their properties being offered for sale.
Host has $2.4 billion of cash and $5.6 billion of debt, with no debt maturities until 2023.
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