BY EMILY SANTIAGO-MOLINA | NOVEMBER 4, 2024

A Newport Beach-based hospitality firm’s latest Orange County transaction marks the region’s second-largest hotel sale of the year after the recent take over of the Pacific Edge hotel in August.

An affiliate of MHG Capital acquired the Embassy Suites by Hilton Santa Ana-Orange County Airport from Windsor Hospitality on Oct. 17 for $41 million, or $136,992 per key. Earlier this year, Pacific Edge traded hands for $80 million, or $640,000 per key.

Newport Beach-based MHG now counts six hotels in its local portfolio.

The hospitality firm’s last OC purchase was of The DoubleTree by Hilton Suites Anaheim Resort Convention Center for $62 million in 2023.

The seven-story property is ranked No. 37 among OC’s largest hotels by number of rooms, according to Business Journal data.

Property Declined 42% in Value

The 301-room Embassy Suites, first opened in 1985, is located at 1325 E. Dyer Road just off the Costa Mesa (55) Freeway.

Windsor Hospitality, a hotel investment firm headquartered in Santa Monica, is also a stakeholder in the 228-room Embassy Suites Brea-North Orange County hotel.

The transaction was listed as a debt assumption. In 2017, the property was appraised for $70.4 million and compared to the new sales price, shows a 42% decline in value, according to Alan Reay of Atlas Hospitality.

Windsor originally took out a mortgage loan of $38.1 million for the Santa Ana property. The proceeds, along with the borrower sponsors’ cash contribution of approximately $16.3 million, were used to refinance existing debt on the Embassy Suites hotel, fund reserves, pay closing costs and pay yield maintenance prepayment costs, according to a collateral asset summary.

The firm had invested approximately $32.5 million into the hotel as of 2017, which was also the last time the Embassy Suites had undergone a renovation costing around $8.4 million. The agreement with Embassy Suites Franchise LLC lasts until the end of March 2030 with no renewal options.

At the time, the hotel was generating about 55% of its room revenue from corporate demand, 30% from a combination of leisure and tourism demand and then 15% from convention group demand.

Rod Apodaca of RJA Hotels was the listing broker.

12,695 Rooms in Planning for OC

MHG’s current property portfolio also includes the 246-key Four Points Anaheim.

The firm operates locally out of 520 Newport Center Drive.

MHG, which stands for Manhattan Hotel Group, got its start in 2012 and bought its first hotel in New Jersey, later expanding to markets in California and New York.

Other California holdings include the Hilton Garden Inn in San Diego and the Sheraton Sonoma Wine Country in Petaluma.

As of August, Atlas Hospitality reported that California’s hotel sales volume was down 49% for the first six months of 2024 compared to the same period last year. Individual sales declined only by 1.6%.

In Orange County, individual hotel sales were down 50%.

“The lingering impact of higher interest rates, combined with the rise in operating costs, particularly in labor and insurance is holding down sales volume and prices,” the mid-year survey reported.

As for development, OC saw one new hotel open in the first half of 2024 — a Homewood Suites in Cypress with 120 rooms. Two more properties are under construction with the largest project located in Buena Park.

According to Atlas, OC has 69 hotels in planning with 12,695 rooms as of July.