California Montage and Westin sell for more than $300 million each

There's one thing all hotel sellers can agree on: "I wish they all could be California..." And they aren't referring to the state's women (as the Beach Boys were); rather, its real estate.

Two recent hotel sales point to this.

First is Strategic Hotels & Resorts' acquisition of the 250-room Montage Laguna Beach from Ohana Real Estate Investors for $360 million. In addition, Strategic assumed a $150-million mortgage loan encumbering the property, priced at a fixed interest rate of 3.90 percent, which matures in August 2021. 

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The deal shows the strength in hotel asset pricing, specifically in the top markets, and moreso in resort destinations. On a per key basis, the transaction in on par with the October sale of the Waldorf Astoria in New York. Both deasl settled in at around $1.4 million per key.

Montage Hotels & Resorts will continue to manage the resort, which opened in 2003 and overlooks the Pacific Ocean. "The acquisition is consistent with our strategy of expanding our best-in-class portfolio of irreplaceable and world-class luxury hotels located in North America," said Raymond L. “Rip” Gellein, chairman and CEO of Strategic Hotels & Resorts. "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. The opportunity to acquire a hotel of this prominence is exceptionally rare.

"Montage Laguna Beach is one of the Southern California resort market leaders with a trailing twelve month RevPAR penetration index of 185 times and a 2015 budgeted ADR of nearly $600 and total RevPAR over $1,000, both of which meaningfully exceed the average of these respective metrics in our already industry leading portfolio."

The Chicago-based REIT has been a player of late. In November, it acquired The Four Seasons Resort Scottsdale at Troon North for $140 million. The deal was valued at $666,000 per key for the 210-room luxury hotel.

Up North
Meanwhile, north of Los Angeles, in San Francisco, the 681-room Westin Market Street, in the city's Yerba Buena district, has been sold to REIT LaSalle Hotel Properties for $350 million, or approximately $514,000 per key. The deal is reportedly the largest hotel transaction in San Francisco since the aforementioned Strategic acquired the 1,195-room Westin St. Francis in 2006 for $440 million.

The hotel is subsequently being rebranded as Park Central San Francisco, and it appears that LaSalle, at some level, is launching that brand name, as it already owns the Park Central in Manhattan, which is acquired in January 2012.

"The San Francisco lodging market remains very strong, with demand at peak levels and limited supply growth on the horizon, and we are excited about increasing our presence in San Francisco for the second time within 10 months - marking our seventh hotel in the city," said Michael Barnello, president and CEO of LaSalle Hotel Properties. "Approximately 17% of our EBITDA is now generated in San Francisco."

LaSalle also acquired the Hotel Vitale last April for $130 million.