Reay
Good luck getting anything for the troubled St. Regis, says an O.C. hotel expert.
Alan X. Reay, president of Atlas Hospitality Group, a Costa Mesa hotel consulting firm, says the current owners of the St. Regis Monarch Beach Resort will be lucky to get any money as they try to find a buyer for their share of the five-star resort.
“They have no equity left. Zero,” Reay said, adding that the lender, Citigroup Global Markets Realty Corp. also probably will take a bath on its investment.
“The lender in first position is going to lose a big chunk of money,” Reay said.
These days, luxury resorts like the St. Regis typically have occupancy rates as low as 15%, Reay said. That clobbers investors who paid top dollar for a property.
In 2007, the owners of the St. Regis borrowed more than $300 million for the resort from Citigroup: A $230 million loan on the property and a $81 million “mezzanine” loan based on the owners’ equity.
“That property is probably worth about $150 million now,” Reay said. “The problem is there’s no financing”
Up for auction is $70 million remaining of that $81 million “mezzanine” loan.
Reay said the resort will probably stay open, because it would cost so much to reopen a closed hotel. Starwood Hotels operates the St. Regis along with several other luxury chains.
“Technically it shouldn’t affect Starwood unless a bankruptcy was filed or unless the hotel is being closed,” Reay said. “The chances of the lender coming and doing that are zero.”
Southern California has a glut of new luxury resorts, many of which are struggling to fill rooms during the economic downturn, especially since corporate partiers at the St. Regis drew the attention of critics in Congress and the White House. For example: In November, the Irvine Company opened the Resort at Pelican Hill, where rooms start at $695 a night. Other new resorts competing for high-end customers include Terrenea in Palos Verdes and the Grand Del Mar in San Diego.
“There’s the AIG factor,” Reay said referring to the outcry that surrounded news that partiers from AIG spent $400,000 at the St. Regis after last fall’s federal bailout of the insurer. “We’re also in a deep recession. People aren’t traveling and staying in high-end resorts. Business travel has fallen off a cliff.”
The hotel’s owner is an limited partnership affiliated with Makar Properties of Newport Beach. Makar is also the developer of Pacific City in Huntington Beach, a multi-use residential, commercial and resort property that is planned to include a W Hotel. Construction of Pacific City appears to have come to a halt and Makar is being sued in Orange County Superior Court by one of the prime contractors, Wright Construction Co., for breach of contract.
- St. Regis financing information: In July 2007, Citigroup extended a $230 million loan to CPH Monarch Hotel LLC. To see the title, CLICK HERE.
- Also in July, Citi wrote the $70 million promissory note to the hotel’s owners, operating as Makallon Resorts, according to public documents. The $70 million is known as “mezzanine” financing, which essentially reflects the equity of the resort’s owners. To see the public notice of sale, CLICK HERE.
Other O.C. business legal issues:
Today’s Good News:
“Fed survey sees signs recession is easing”
http://apnews.excite.com/article/20090610/D98O0KSO0.html
(Does anybody care about the St. Regis? … bring on more ‘Real Housewives’ if you want to see some audience participation - sheesh … the number of responses !)
The St Regis was ill-conceived, no doubt by an Ivy-Leaguer.
The avg best rate there is $460.
The avg best rate at the Ritz is $463
There is the problem… it’s positioned to compete with Ritz but with a Hyatt type product. The avg best rate at the Hyatt Reg.- Newport Beach is $205. There is their target if they want to keep it filled. Whoever conducted the preliminary demographic studies should be fired
It’s a bloated goat and it’s doubtful it will work at $205.
The place makes no sense.
I much prefer the St. Regis over the Ritz…I get better treatment there, I prefer their rooms over the Ritz’s, and frankly, I simply prefer their ambiance.
And we all know what a discriminating consumer you are.
You do not know me anymore than I know you. Why the assumption? Seriously…when you do not have a clue as to what you are talking about, better to not say much at all.
The rather pompous way you wrote that gives a pretty good clue as to who you are.
Does anyone ever get tired of the bickering? Seriously… figure it out.
For your info, the Ritz was originally planned as a Sterling Suites Hotel , changed to a Ritz and opened some 25 years ago! I would trust you have not stayed at either to see the difference, in rooms, decor, amenities, landscape etc. St. Regis is almost like new and more updated!
St. Reis MB is I think better than most Hyatt’s.
In fact there is the Park Hyatt Brand which is very high end in Asia and Pacific, I thought you should also know that….
Maybe Makar Properties of Newport Beach can pick up the W hotel in San Diego that was just dumped back on Citigroup.
Didn’t we go through some of this in the ’90’s?
They need to run specials for SO Cal residents. 99.00 a night and they will fill up and make some money
The wealthy “elite” are the last to understand their cheese has moved.
I’d take your advice and have every room filled every night for the next 5 years til this “recession” begins to recover.
But, they’d rather walk than work.
Looks like these guys and ‘real housewife’ of OC didn’t get the notice from gunner and dealtracker that OC housing bottomed early this year?
If they had got that notice from gunner and dealtracker (aka dealeo), they would not have defaulted on their loans.
I wonder how the Montage is south Laguna is doing? It’s ludicrous though that the IRS/government allows companies to write off expenses for business events at hotels like these.
It’s such a ripoff to pay $460+taxes for a place to stay.
You get the same write off at the motel 6…..might as well enjoy it.
At least the Motel 6 allows pets.
Kids stay free at Motel 6!!!
I too would like to know the current fiscal state (and occupancy ) of the Montage (and its new Bev Hillls sibling). The Laguna Montage consistently has higher avg rates than either the Laguna Ritz or the St Regis.
As for the ability to expense luxury travel — dont forget that these entities do employ people. Yes, a meeting at a Motel 6 would cost less; however it would do nothing to reward/motivate a top sales team or employ a golf pro, masseur / spa manager, restaurant / room service folks, pool services, bartenders etc. In addition to the lost incomes and thus lost state income taxes (hey you are over 10% now in CA! ), while both the state and county lose the very hefty sales taxes on ALL those activities (food and beverage often exceed 10%, occupancy taxes often over 15%)
Prescient of the bears on this blog and others that said commercial RE was the next shoe to drop.
Just have the government take it over and turn it into a playground for the children and friends of the Obama regime. Obama can buy it with tarp money like GM and promise he’ll turn a profit within 4 years. Ooops. I forgot his term ends in 3 1/2. We can rename it ‘Barry’s Nest’.
Oh great. Citibank is the lender on this one? ha! Get back in the bailout line for seconds! Looks like the taxpayer will own this one too! But when you go to get a room tell them that you are a partial owner of the resort and ask for a steep room discount. See how far that gets ya!
I think the AIG should be the contestants on I’m a Celebrity Get me out of Here. LOL And, instead of winning money they would win a box of Preparation H because they have been a pain the butt for all of America.
My tender offer for the joint is 50 bucks and a BigMac since that’s all it’s worth.
I hope I’m not supposed to be upset by this.
i live less than a mile and a half from this place
I agree with Mulli - this place is unique in the service, environment and overall comfort
Although I have spent time in the guest rooms, I never actually slept there overnight
Did you work as a HouseKeeper there? That would be only way you would see this Hotel from the inside.
Maybe she is a high end prostitute?
These companies help the tenants and buyers to find out the property of their choice. They also help the landlords in constructing the building, mall, houses, apartments, etc. Soon after the construction work is finished the property have to be used efficiently so that it gives a good return. So for a good flow of income the landlords hire companies to manage their property.
We have stayed there three times and also have been to the Ritz multiple times. Both resorts are nice. The service is a little better at the Ritz. The location next to the beach at the Ritz is also better. But, overall the St Regis is a nice location.
Ha Ha
I worked for a company years 5-6 years ago as a supplier to this property. Net 30 day terms. They typically paid between 90-120 days.
Like pulling teeth to get money out of them. It’s been a long road for the St. Regis.
Time to fold the tent.
Would make a nice senior facility.
This is so ironic. It is the denizens of Monarch Beach that ultimately helped kill the St. Regis. They probably spent more money than any other area fighting against El Toro International Airport. Now that there are fewer tourists coming into O.C. and NO international airport to draw in world travelers, resort business is way down.
The poor economic health of the St. Regis cannot be good for Dana Point’s taxbase. The denizens should have spent their money promoting economic growth rather than inhibiting it.
eltoroairport.blogspot.com
Agree that the St. Regis could be re-purposed as a senior facility. Or a high end hospital - I assume it satisfies the earthquake requirements that South Coast Medical do not.
No doubt the hotel was planned for El Toro International Airport. Aliso Viejo has insurance companies and freight that invest in airports. Best use for St Regis may be a luxury hotel.