CNL To Flip Hotel Del Coronado Interest for $165M

CORONADO ISLAND, CA-Less than two years after buying an interest in the Hotel del Coronado, Orlando-based CNL Hotels & Resorts Inc. has decided to sell its stake in the historic property. Although the buyer has not been named, CNL will sell its share of the 679-room luxury hotel for $165 million. The deal will close during the first quarter of 2006.The property “outperformed our expectations,” says Thomas J. Hutchison III, CEO of CNL Hotels & Resorts, in an official company statement. He added that the Hotel del reached “a targeted level of profitability three years ahead of our projections.”CNL picked up the property in December 2003, along with New York-based Kohlbergh Kravis Roberts & Co. and La Quinta-based KSL Resorts. The partnership paid an estimated $385 million to Los Angeles-based Lowe Enterprises Investment Management LLC.According to company reports, the firm netted an estimated net gain of $141 million. CNL plans to use part of the proceeds from the sale for acquisitions in the luxury resort industry. “We are evaluating a number of acquisition opportunities,” Hutchinson adds.The sale for CNL fits its recent business model. Earlier this year, the firm sold a 30-asset, 4,328-room hotel portfolio to Ashford Hospitality Trust Inc. for $465 million. One hotel industry expert tells Globest.com there is a reason for CNL’s heavy sell mode. “CNL tried to go public, but the stock price was not appealing to them,” says Alan X. Reay, president of Costa Mesa-based Atlas Hospitality Group. To raise capital, the firm is now divesting itself of certain property.According to Reay, the San Diego hotel market is among the strongest in the country. “Prices are up all over California, but particularly in San Diego.” In Atlas Hospitality Group’s Mid-Year Hotel Report, San Diego County shows total dollar volume rising 254% from the same time a year ago. The total sales price grew from $64 million for the first half of 2004 to $229 million in 2005.Sixteen hotel deals closed by mid-year 2005, compared to 13 transactions at mid-year 2004. Besides the Hotel del, three other large deals have closed in San Diego County: Hilton Gaslamp Quarter for $85 million; Hilton Mission Valley for $46 million; and Courtyard Marriott Downtown for $44 million.