The Ritz-Carlton Laguna Niguel, the posh seaside resort that launched the luxury building boom along Orange County's coastline 20 years ago, is being sold in one of California's priciest hotel acquisitions.
Strategic Hotels & Resorts Inc., a Chicago real estate investment trust, said Wednesday that it was buying the 393-room hotel for $330 million. That amounts to about $840,000 per room, second only to the sale of the historic Hotel del Coronado near San Diego in February for $745 million, or a record $1 million per room.
The Ritz deal underscores the high valuations being placed on coastal properties as regulations and a scarcity of available land make it increasingly difficult to build resorts.
Strategic Hotels is buying the Ritz-Carlton from Strategic Hotel Capital, a private investment group from which the publicly traded REIT was split off. There were several bidders for the 18-acre property, which went on sale this year.
"This is by any measure a huge amount," said Alan Reay, president of Atlas Hospitality Group, an Irvine consulting firm. He noted that the purchase was a record price for an Orange County hotel.
Since opening in 1984, the Ritz-Carlton -- it's actually in Dana Point -- has earned top honors from hotel and restaurant critics. Its world-class status and setting on a 150-foot cliff above the Pacific have attracted stays by Presidents Ford, Carter and Reagan and celebrities such as Michael Jackson.
The Ritz-Carlton also is credited with helping to establish Orange County's reputation as a center for beach resorts, while spawning a resort building boom along the entire Southern California coast.
Lately, it has been in danger of losing business to newer hotels with state-of-the-art amenities, such as the nearby St. Regis Monarch Beach Resort & Spa in Dana Point, Montage Resort & Spa in Laguna Beach and the Lodge at Torrey Pines in La Jolla.
Over the last two years, the Ritz's owners have spent $40 million to update its image from the days when guests were discouraged from wearing jeans in the lobby. The resort is putting the finishing touches on an interior makeover with an emphasis on its spa and fitness facilities and a remodeled bar to attract younger visitors with money to burn.
With its renovation, the Ritz-Carlton "is a different hotel," said Laurence Geller, chief executive of Strategic. "With all the new competition on the market, it's been given 20 years of new life."
New prices accompany the new look. Room rates today start at $400 a night and spiral to more than $2,000 for a suite with panoramic views of the Pacific. A $750-a-night stay comes with free use of a Mercedes-Benz.
Since going public two years ago, Strategic has been on a luxury-hotel buying spree in California. Last month, the REIT bought San Francisco's iconic St. Francis hotel for $440 million, or $368,000 per room. It also owns the Loews Santa Monica and the Ritz-Carlton in Half Moon Bay, Calif., among 15 other upscale properties. The Dana Point hotel will retain the Ritz-Carlton name.
Geller said Strategic was eyeing other top-tier West Coast resorts.
"California is such a unique environment," he said. Geller added that high-end hotels in the Golden State have plenty of room to expand their sales, in part because the public's appetite for luxury goods and services seems to be insatiable.
Plus, there isn't much available coastal property anymore, putting a high premium on existing ocean-view resorts.
"It would be a huge undertaking to duplicate the Ritz in today's market," Reay said. "And if you do have the land, it would be time-consuming and costly to reproduce that kind of product."
There are two luxury coastal hotels under construction in Southern California: the $325-million Terranea Resort in Rancho Palos Verdes and Pelican Hill, a 115-acre resort in Newport Beach.
"Once those are built, that will be it for quite some time," said Bruce Baltin of Los Angeles-based PKF Consulting.
As part of Wednesday's deal, Strategic will assume $8.5 million in debt from Strategic Hotel Capital. The company also said it was selling the Marriott Rancho Las Palmas Resort & Spa in Rancho Mirage for $56 million. The buyer is KSL RLP Holdings, an affiliate of KSL Capital Partners, which along with Strategic is a co-owner of the Hotel del Coronado.
Strategic's shares fell 20 cents Wednesday to $22.93.
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Recent sales of high-end hotels in California
Hotel del Coronado
Price, in millions: $745
Price per room: $1,076,590
Ritz-Carlton Laguna Niguel
Price, in millions: $330
Price per room: $840,000
St. Regis Hotel, Century City
Price, in millions: $123
Price per room: $414,141
Century Plaza Hotel & Tower
Price, in millions: $293
Price per room: $402,473
Westin St. Francis, San Francisco
Price, in millions: $440
Price per room: $368,000
Source: Atlas Hospitality Group
Los Angeles Times