Monarch Beach Project Comes Out of Its Cocoon
Capital Pacific Holdings Inc. said Thursday it paid $120 million for a huge Dana Point golf, hotel and luxury home project put on hold by the early-1990s real-estate bust.
The 225-acre Monarch Beach Resort site, mostly on the inland side of Pacific Coast Highway, includes an existing beach club and a golf course. The site, near the Ritz-Carlton hotel, has been pre-approved for a 400-room luxury hotel and 238 homes.
Capital Pacific, primarily a home builder, said hotel company Patriot American Hospitality Corp. has signed an option to become its partner in the deal. The companies said they plan to invest $400 million in the project.
Experts said the deal shows that while coastal real estate is red hot, prices have yet to reach the frenzied peaks of 1990.
The seller was Japan’s Nippon Shinpan Co., a lender that in 1989 helped finance the $132-million purchase of the site by Qintex, an Australian company.
Qintex, a classic 1980s over-reacher known for a failed attempt to buy the MGM movie studio, went bankrupt. In 1990, Nippon Shinpan took over as owner of the property. Its total investment was $150 million or more.
By the time the city approved Nippon Shinpan’s development plans, recession had set in. The project went dormant--until Capital Pacific, expanding aggressively in coastal areas, came along and began talking about reviving it six months ago.
Stan Ross, managing partner of the real estate accounting firm E&Y; Kenneth Leventhal, said the deal illustrates how overvalued many properties had become in the late 1980s.
While many high-end residential properties have recovered their full value in the current boom real estate markets, other properties have a way to go, he said.
“It’s the same thing with a lot of office buildings,” Ross said. “They’re returning to previous levels, but they aren’t there yet.”
For Japanese investors such as Nippon Shinpan, the revival of real estate here contrasts with economic hard times at home, making it attractive for them to sell, Ross added.
“They’re getting far more than they could have three years ago, and they clean up their books,” he said.
Hadi Makarechian, Capital Pacific’s chief executive, said his company will build the hotel; Patriot American is expected to be part owner and operator.
Makarechian said Patriot American has paid $7.5 million for a 120-day option on the partnership.
Most of the hotel rooms will have ocean views, Makarechian said. Unlike those at the Ritz-Carlton, the hotel’s swimming pools will face the Pacific.
Makarechian also pointed out that the property includes the existing golf course, which extends under the highway to the beach and the private, oceanfront Monarch Beach Club.
He said the course and club will be fixed up to complement the luxury hotel, giving guests access to beach and links--something lacking in most other proposals for luxury hotels along the coast.
Makarechian said he hopes the city will allow him to reduce the number of homes in the project from 238 to 100 or 150 larger estates.
“I think higher-end homes will fit much better with the high-end resort,” he said.
Nippon Shinpan officials couldn’t be reached for comment.
Final drawings for the property must be approved by Dana Point. In a best-case scenario, construction could start in six to eight months, Makarechian said.
