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Marriott Sells Stake in Laguna Project

June 22, 2002|BONNIE HARRIS | TIMES STAFF WRITER

Marriott International Inc. said Friday that it sold its majority interest in the new Laguna Beach Colony hotel for $190 million, the highest per-room price paid for a U.S. hotel this year.

The purchase by Laguna Beach Resorts eliminates Marriott as owner and developer of the 30-acre, 260-room hotel--a Craftsman-style resort under construction atop a 50-foot ocean bluff that is being billed as the crown jewel of Southern California's "Gold Coast" of luxury properties that stretch from Orange County to San Diego.

"Our business model has long been in managing hotels, not owning them," said Marriott spokesman Roger Conner, noting that of 2,600 hotels Marriott manages worldwide, only a handful are owned by the Bethesda, Md.-based company. "In this case, clearly, it was economically lucrative for us to proceed with the sale."

The buyer is a partnership of Montage Hotels & Resorts and Athens Group, which is the original developer of the project.

The price per room paid by the buyers is estimated to be about $538,000--excluding land costs--which is the highest in the U.S. this year and nearly double the highest in California last year, said Alan Reay, president of hotel brokerage firm Atlas Hospitality Group. The purchase price includes 14 lots for single-family homes and 14 condominiums that also are part of the resort complex.

Alan Fuerstman, who formed Montage Hotels & Resorts this year, will oversee operation of the hotel, which is being renamed Montage at the Laguna Beach Colony. Fuerstman is former vice president of operations for the Bellagio hotel in Las Vegas. Before that he managed the Phoenician in Scottsdale, Ariz., which under his direction achieved status as one of the top U.S. resorts.

"The city of Laguna Beach obviously wants a five-star operator at the new property, and that's certainly what they're getting," Fuerstman said Friday. "It is absolutely a world-class piece of real estate, and it is destined to be the most magnificent resort ever to grace Southern California."

Word that a purchase was in the works began spreading last month, when Athens Group asked the city to modify its contract to give more flexibility in choosing an operator that would maintain high standards, said Laguna Beach Mayor Wayne Baglin.

Marriott, the largest U.S. hotel firm, recently said it sold a 405-room Courtyard in San Francisco and a 347-room hotel in Bridgewater, N.J., in a deal for about $143 million. It has sold about $300 million in assets so far this year.

But analysts and hotel industry experts said the sales are not particularly unusual for Marriott, and called the Laguna Beach Colony deal a sound move in an unsure market.

By this time next year, dozens of new resorts either will be open or under construction in Southern California and such a rapid surge in supply could be problematic, said Donald Wise of Wise Hotel Investments in Newport Beach. Since Sept. 11, the luxury hotel market has taken a 25% hit in occupancy rates..

"Basically, we don't know what's going to happen in this market over the next couple of years," Wise said. "So for Marriott to bow out now is actually perfect timing. They're selling the sizzle, not the steak, because they're selling the future."

The Laguna Beach resort is scheduled to open early next year.

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Times staff writer E. Scott Reckard contributed to this report.

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