Dealmaker: Sunstone Hotel Investors Acquires Montage Healdsburg Resort For $265M

Sunstone Hotel Investors, Irvine, Calif., acquired the 130-room Montage Healdsburg resort in northern California for $265 million.

The resort delivered in December 2020. Sunstone funded the acquisition with cash on hand and by issuing $66 million in preferred equity to seller Ohana Real Estate Investors, Park City, Utah.

Sunstone said it expects the resort to generate a 6.0 percent to 7.0 percent net operating income yield on invested capital when it stabilizes.

Sunstone President and CEO John Arabia said Montage Healdsburg took more than 15 years to develop and is located in one of the most sought-after leisure destinations in the U.S., California’s Sonoma County. “We acquired the resort on an off-market basis and at a discount to what it would cost to develop today,” he said noting the acquisition fits with the real estate investment trust’s stated tactic of acquiring assets in the early phases of a cyclical recovery. 

“Additionally, we are funding 25 percent of the transaction with attractively structured perpetual preferred equity that is being issued directly to the seller that aligns our interests and gives us additional optionality,” Arabia said.

Montage Healdsburg includes 130 bungalow-style rooms and suites, each with an outdoor fireplace and most with their own outdoor shower.  The 117-acre resort includes 16 acres of vineyards, an 11,500-square-foot spa and 12,000-plus square feet of purpose-built meeting space and event lawns.

Montage Hotels & Resorts will continue to manage the property.