90% of Ritz-Carlton Sold to Prudential for $90 Million

Ending months of negotiations, Prudential Insurance Co. of America on Friday completed the purchase of 90% of the Ritz-Carlton resort hotel in Laguna Niguel for $90 million cash, officials of Prudential and W.B. Johnson Properties, the hotel’s builder, said Tuesday.

The remaining 10% interest in the hotel will be retained by Monarch at Laguna Beach, a limited partnership controlled by Johnson Properties. The hotel will continue to be managed by the Ritz-Carlton Co., a Johnson Properties subsidiary.

S. Michael Bennett, Prudential’s vice president of acquisitions and sales, said the New Jersey insurance giant regards the 393-room Ritz-Carlton as a strong, long-term corporate investment. He said the insurance company had been considering the possibility of acquiring a controlling stake in the ocean bluff-top hotel since last fall.

“We think it is a very quality investment in a very growing, dynamic area,” said Bennett. He said Prudential owns interests in other hotels nationwide, totaling about 30,000 rooms.

George Brown IV, president of Johnson Properties, an Atlanta real estate development and management company, said it is customary for Johnson Properties to share ownership in its hotels. Currently there are four hotels in the Ritz-Carlton chain and another under construction in Naples, Fla.

Brown denied reports that Johnson Properties was relying on Prudential to provide new financing for the opulent, Mediterranean-style hotel.

Brown also said that the deal with Prudential was not designed to satisfy about $8.9 million in unpaid claims from 55 contractors on the hotel project. Stolte Inc., the Los Angeles general contractor on the hotel project, and 16 subcontractors have filed lawsuits in support of liens they have placed against the hotel property.

In an earlier interview, Brown said Johnson Properties has not encountered a shortage of funds, as some of the contractors allege. But he said the corporation has needed time to sort out the claims, which he said were complicated by numerous changes ordered in mid-construction to make the hotel more lavish.

Brown said the Newport Beach law offices of O’Melveny & Myers, which represents Johnson Properties on the Ritz-Carlton project, has been “authorized to pay legitimate claims.”

Prudential’s Bennett would not comment on the claims. “We don’t consider that part of our transaction,” he said.

Stolte officials said Tuesday that they have lost faith in Johnson Properties’ promises to pay its bills. “They have been promising me so long that I have given up hope,” said John Stephens, Stolte’s executive vice president.

Most recently, Stephens said, Stolte agreed to pay $1.8 million to 40 of the 55 creditors whose claims were least in dispute. Stephens said Johnson Properties representatives assured Stolte that funds from Manufacturers Hanover Trust, the bank financing the Ritz-Carlton project, would arrive Feb. 19. But, he said, the money was not received and Johnson Properties gave no explanation.

Stephens said that although Johnson Properties’ attorneys have indicated that some payments may be made as early as this week, he is not counting on it. The lawyers could not be reached Tuesday for comment.

“It is extremely unfair,” said Albert Rossi, a Huntington Beach contractor who installed the utilities, including water and sewer lines and storm drains, at the Ritz-Carlton. Last week Rossi filed a lawsuit in an attempt to recover $292,516 that he contends Johnson Properties still owes him. Rossi said that because he had to use his own funds to finance part of the hotel’s construction, his firm is short of working capital.