CHICAGO—Strategic Hotels & Resorts, Inc. has acquired the 250-room Montage Laguna Beach in California from an affiliate of Ohana Real Estate Investors LLC for $360 million, plus customary working capital adjustments. The company funded the acquisition, in part, through the issuance of 7,347,539 shares of common stock to an affiliated designee of the seller, priced at $13.61 per share, or an implied valuation of $100 million. In addition, the company assumed a $150 million mortgage loan encumbering the property, priced at a fixed interest rate of 3.9%, which matures in August 2021. The remaining portion of the purchase price was funded with existing cash balances.
Montage Hotels & Resorts will continue to manage the destination resort, which features 250 ocean-facing guestrooms and is located on approximately 30 acres of fee-simple owned land sitting atop a 50-foot bluff overlooking the Pacific Ocean. Opened in 2003, the hotel features 60 suites, 16,000 sq. ft. of indoor meeting space, a 20,000-sq.-ft. spa, and multiple acclaimed food and beverage outlets.
“We are thrilled to acquire Montage Laguna Beach, a truly iconic luxury hotel located on one of the best resort settings in the continental United States. 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,” commented Raymond L. “Rip” Gellein, chairman and CEO of Strategic Hotels & Resorts, Inc. “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, and we are delighted to work with the team at Ohana on this transaction, as well as beginning what we believe will be a long and successful partnership with Montage, whose exceptional stewardship of this asset over the years has positioned the company as a pre-eminent operator of luxury hotels and resorts.”
Said Alan Fuerstman, founder and CEO of Montage Hotels & Resorts, “We are excited to be working with Strategic Hotels & Resorts, who, as one of the leading luxury hotel owners in our business, share our ongoing commitment to the outstanding hospitality established at Montage Laguna Beach over many years.”
The purchase price represents a 16.5 times multiple on forecasted 2015 EBITDA of $21.8 million and a 5% capitalization rate on forecasted 2015 NOI of $18.1 million.
“Montage Laguna Beach is one of the Southern California resort market leaders with a trailing 12-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,” continued Gellein. “Together with Montage, we will continue delivering a superior guest experience at the hotel while further enhancing operating results by leveraging our industry leading asset management expertise and their ability to deliver market-leading results.”
JLL acted as an advisor on the transaction. Strategic was represented by Greenberg Traurig LLP and Paul Hastings LLP on the transaction and Ohana was represented by Dentons.