A new $610 million mortgage loan on the historic Hotel del Coronado places its value at $745 million. At more than $1 million per room, that sets an all-time high for any hotel in the state.
Deutsche Bank provided the loan, completing a recapitalization of the posh 679-room property on Jan. 12, according to Commercial Real Estate Direct, an online news service based in Newtown, Pa.
According to Alan Reay, the president of Costa Mesa-based Atlas Hospitality Group, “That places the value of the rooms at more than $1 million. We’ve not seen anything sell for over $1 million per room in California history.
“There may be other hotels with as much cachet and someone may come along at some point and offer to pay more per room, but to date that hasn’t happened.”
The Del’s mortgage loan, which will be resold to investors via the commercial mortgage-backed securities market, has a three-year term, but could be extended for two additional years.
The recapitalization involved the sale by Orlando, Fla.-based CNL Hotels & Resorts of a 70 percent stake in the property for $166 million to La Quinta-based KSL Recreation and New York-based Kohlberg Kravis Roberts & Co. late last year. The three companies had acquired it in partnership in December 2003 for $383 million.
The two remaining partners, KSL and Kohlberg Kravis Roberts, then sold a 45 percent interest in the hotel to Strategic Hotel Capital Inc. for $70 million.
Strategic took a share in the property’s debt. They then refinanced a $400 million mortgage that Deutsche Bank had provided last year.
The hotel’s appreciation in value is due largely to its net operating income, which rose to $36.7 million in 2004 from $30.3 million the year before. For the first half of last year, it totaled nearly $20 million, said Orest Mandzy, the publication’s editor.
“You could project that operating income would be roughly $40 million by year, so that would be a 33 percent increase from last year,” Mandzy said. “Net operating income has skyrocketed.”
Throughout the last six years, the hotel has maintained an average annual occupancy rate of more than 77 percent. The revenue generated from the total rooms that were rented yearly has averaged $191 per room, he added.
, Connie Lewis