5-Star Attraction Ritz-Carlton Is On the Market

The popular Ritz-Carlton hotel is quietly being peddled by owner Prudential Insurance Co. of America, which is betting that this will be a good year for commercial real estate.

The asking price is “not public,” said Peter C. Krause, a New York investment banker who is handling the sale for Prudential. A spokesman for the insurance company Thursday would not comment on the Dana Point property.

“The company has put this up for sale very quietly,” said Donald W. Wise, first vice president of CB Commercial Real Estate Group Inc. in Anaheim. He has long maintained that more than a dozen potential buyers from the United States and Pacific Rim countries would like to bid on the hotel.

The hotel is “one of the most successful” operations in the chain of 32 Ritz-Carltons, Wise said. It has a consistently high occupancy at rates averaging more than $225 a day, producing strong cash flow, he said.

Its location overlooking the ocean in south Orange County makes it a favorite destination resort, he said. In addition, local residents often regard it almost as their own country club.

“It has been a place to hang out, to go to for lunch and for brunch on Sundays,” he said. “For Christmas, you’ve got to book months in advance to get in.”

In late 1995, Prudential decided to start selling some of its landmark U.S. properties--like the Chicago Hilton and Towers, NationsBank Tower in Dallas and the Prudential Center in Boston--and buying warehouses, manufacturing plants and apartments.

At the time, the Ritz-Carlton was not for sale, said Prudential spokesman Rick Matthews. The company did sell such prime pieces as the Chicago and the San Francisco Hiltons last year, and is in negotiations to sell the Century Plaza Towers in Los Angeles.

But last fall, the Newark, N.J., insurer decided that it would dramatically reduce its direct ownership of $5.5 billion worth of several hundred commercial properties over the next three years, Matthews said. The portfolio was funded by premiums from general insurance policy holders.

“When the dust settles, we’ll probably have less than $2 billion in direct real estate ownership,” Matthews said. “We’ll reinvest the money in higher yielding forms of property ownership, like real estate investment trusts.”

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Though he wouldn’t comment on the Ritz-Carlton, other industry sources said Prudential executives decided last fall that it would be included this year in the properties to be sold.

“The strategic plan was to wait until they perceived that the market timing was right,” Wise said, and executives decided that “1997 was going to be a robust year.”

Putting a value on the hotel would be difficult, he said, because it would be based not only on property values but also on the cash flow from the business, and Prudential isn’t releasing the information publicly.

The Ritz-Carlton, one of the first in the chain to be built in the early 1980s, was a cornerstone in the master plan for the Monarch Bay area by developer Stein-Brief Group. But financial problems led to a foreclosure in 1985 when Prudential picked up 90% of the hotel for $90 million in cash.

Prudential spent $6.7 million in 1993 to renovate the hotel’s 393 rooms and, in August that year, bought the remaining 10% for $14 million to own the hotel outright.

Other Ritz-Carltons in California are in Marina del Rey, Rancho Mirage and San Francisco.