Orchid at Mauna Lani sold for $140 million

By Frank Cho
Advertiser Staff Writer

Colony Capital LLC has sold The Orchid at Mauna Lani on the Big Island to a Canadian company for $140 million — almost double what the Los Angeles-based investment company paid for the luxury hotel in 1995.

Fairmont Hotels & Resorts Inc., which already owns the Fairmont Kea Lani on Maui, said the purchase fits its goal of adding more U.S. luxury properties.

Fairmont said it will manage the hotel and will rename it the Fairmont Orchid, Hawaii.

Fairmont will use the hotel's 42,000 square feet of meeting space to boost the property's income, it said. The company said the purchase will be financed by existing credit lines and is expected to close in December.

The the 539-room Orchid has been among the better-performing luxury hotels on the Big Island's Kohala Coast.

"The Fairmont brand is well positioned in the resort market, in locations with high barriers to entry, and a strong presence on the West Coast," said William Fatt, Fairmont's chief executive officer. "In addition, the guest profile and the product quality of The Orchid at Mauna Lani are consistent with those of the Fairmont brand. As a result, we believe it will be a strong complement to our current portfolio."

The Orchid, on 32 beachfront acres, was put on the market earlier this year by Colony after it hired New York-based real estate investment banking firm Eastdil to explore a sale. The property was Colony's largest remaining Hawai'i asset.

"It is not a reflection on The Orchid or Hawai'i that this sale took place," said Owen Blicksilver, a Colony spokesman. "Colony is still very bullish on Hawai'i and continues to have investments there and continues to look at new investments. The Orchid was a strong investment and did well over the years, but Fairmont is one of the best brands around and the investors were looking to get some of their return on their investment."

Colony, a firm founded in 1991 that has invested about $8 billion for major institutional investors, was one of the early purchasers of Hawai'i real estate when the boom of late-1980s Japanese investment started to go bust with distressed property sales in the mid-'90s.

In the mid-'90s, Colony had a small stake in the Waikoloa Village. At the time, Colony, in whole or part, owned more hotel rooms than any other single investor on the Kohala Coast — roughly 1,800 luxury hotel rooms between the Mauna Lani and Hilton Waikoloa.

The company bought the Orchid, then known as the Ritz-Carlton Mauna Lani, in 1995 for $75 million — a 57 percent discount from the $175 million Ritz-Carlton Hotels and its Japanese partners ONKD Inc. spent to develop the property.

Blicksilver said the company is still committed to Hawai'i through its ownership of the Pauao Beach resorts on the Big Island and the W Hotel in Waikiki.

The Orchid's former sister property, the 548-room Ritz-Carlton Kapalua on Maui, was bought last year for $144 million by a joint venture between Marriott International Inc. and investment firm Blackacre Capital Management LLC.

Fairmont, which manages such luxury hotels as New York's Plaza, was spun off from Canadian Pacific along with the company's rail, shipping and energy units in October.

Fairmont gets about half of its profit from its Canadian hotels, which are benefiting from business travel that is stronger than in the United States and from a favorable currency exchange rate with the U.S. dollar, which encourages tourism, analysts said.

Correction: The headline in a previous version of this story incorrectly stated the dollar amount of the sale.