CORONADO, CALIFORNIA Blackstone Real Estate Advisors has finalized the acquisition of a 60% ownership stake in the 787-key Hotel Del Coronado, the iconic seaside property that had struggling under US$630 million of debt. The transaction values the hotel at US$590 million.
The transaction creates a new joint venture between Blackstone and part of the existing ownership group led by Strategic Hotels & Resorts Inc. and joined by KSL Resorts. The joint venture is investing cash into the asset and will convert a portion of the existing debt into equity. As part of the recapitalization, Deutsche Bank has originated US$425 million in debt financing.
Blackstone becomes the general partner of the new joint venture, while Strategic will continue as asset manager and KSL Resorts continues as hotel operator. Strategic and KSL now own stakes of 34.3% and 5.7%, respectively. Kohlberg Kravis Roberts & Co., which previously held a minority share in the property, is not included in the new ownership group.
Hotel Del, as it is colloquially called, was valued at US$745 million in 2006, when Strategic bought a 45% stake from KKR and KSL.
“We are very pleased by this outcome, as it provides the opportunity for us to achieve attractive returns on our new investment, significantly reduces the hotel’s indebtedness and maintains our ownership in this iconic asset,” says Strategic CEO Laurence Geller. “The Hotel Del Coronado is an integral part of our portfolio and we welcome Blackstone into the partnership. Given the attractive growth characteristics of both the hotel and the San Diego market, we expect to further enhance the hotel’s operations and overall value as it returns to, and potentially surpasses, previous peak performance.”