The article posted Wednesday, Nov. 1, was updated Nov. 3.
By Cassandra Reinhart and Andrea Adelson, LB Indy
The local family that has operated the iconic Hotel Laguna for more then three decades intends to close its doors next month and has filed a lawsuit alleging they are being illegally forced out by the property’s owners.
With its lease ending Dec. 31, operators filed a notice with state regulators of the permanent closure of the hotel and termination of 141 hotel employees, effective Dec. 15, a document dated Oct. 12 and filed with the Employment Development Department shows.
Andersen Hotels, Inc., the group that has operated Hotel Laguna for 32 years, the same day sued the hotel property’s owners, E.W. Merritt Farms, for breach of contract and fraud.
The lawsuit, filed in U.S. District Court in Santa Ana, alleges that Merritt Farms, of Porterville, Calif., illegally “sold” the hotel under the guise of a 99-year lease to a group of prominent local business owners. The lawsuit names the new operators as Kimbark Group LLC, a Delaware company, real estate developers Joe Hanauer and James “Walkie” Ray and local IMAX filmmaker Greg MacGillivray. It alleges the local group self-described themselves as Hotel Laguna’s new “owners” and asks the court to bar the group from using the trademarked name, among 12 allegations altogether.
“Had they handled this civilly we could have negotiated a peaceful turning over of the hotel, but at this point my client feels very wronged by the entire situation,” said attorney Proud Usahacharoenporn, representing Andersen Hotels and its president, Georgia Andersen.
Under the current lease agreement, Andersen Hotels has the first right of refusal should Merritt Farms decide to sell the 63-room hotel operation, according to the lease terms outlined in the lawsuit. The lawsuit alleges that Andersen Hotels learned of the 99-year lease to the above named new “owners” in January of 2017, and that Merritt Farms has failed to disclose the terms of the agreement to the hotel operators despite repeated requests.
“My client feels she has been treated very poorly,” Usahacharoenporn said. “She negotiated a lease that gave her first right of first refusal if the landlord was going to sell the hotel.”
Andersen Hotels also alleges loss of business due to cancelled reservations because of the uncertainty of the hotel’s operating future.
“They are refusing to give us any information about the agreement so that we can determine what to do with the hotel, the employees, the tenants, the guests,” Usahacharoenporn said. “This has caused a lot of business interruptions to my client because of the uncertainty.”
Hanauer and Ray declined comment on the suit and the group’s intentions for the property. “So, while our plan for guiding this iconic hotel property’s future will prove beneficial for all of Laguna—our primary interest being the preseveration of Laguna’s historical buildings and charm—it is premature to discuss the specifics at this point,” MacGillivray said in a statement.
The city’s development director, Greg Pfost, said he had met with Hanauer and MacGillivray and advised them about downtown development regulations and standards, but no application has yet been submitted.
In recent days, Hotel Laguna Beach Club members also received notices of the club’s closing effective Dec. 15, said longtime member and local resident Susan Pons. Memberships began at $1,500 a year and entitled guests food service on the sand.
The hotel’s website shows no rooms to be available after Dec. 1. Efforts to reach hotel retail tenants were unsuccessful.
Jake Shepard, a partner in E.W. Merritt Farms, had little comment, but did acknowledge that Merritt Farms had been served with the lawsuit.
“Many of the disputes and facts stated in the complaint are false,” Shepard said. “The lawsuit has been given to our attorney who will file an appropriate response as required.”
Merritt Farms, a melon grower, acquired the hotel in 1973, and Shepard said the hotel had “been in the family for decades.” Besides the prominent hotel corner at Coast Highway and Laguna Avenue, the Merritt family controls the entire block of waterfront properties south of the hotel, with the exception of the adjacent Wyland Gallery, city property records show.
Hotel Laguna, anchoring the south crescent of the town’s Main Beach, has deep roots in downtown, dating back to 1888. The current building, with Spanish-style arches and a bell tower, was rebuilt in 1930 and lured a prestige clientele, such as Errol Flynn. It has since remained an operating hotel, restaurant, and destination wedding spot, but has lost some of its status as newer properties outfitted with modern amenities have opened in recent years.
Andersen’s husband, Claes, who leased the hotel beginning in 1981, aimed to infuse the historic property with European flair, but relatively short lease terms discouraged capital improvements, says a confidential report prepared for another potential bidder. The most recent lease renewal in 2000 extended the contract until 2017, court records show.
Georgia succeeded her husband, who died in 2010. The couple’s son Stefan now manages the hotel.
The suit seeks unspecified actual and punitive damages to be determined at trial. Usahacharoenporn says jurors will decide for themselves. “It’s difficult to quantify what a 99-year lease is worth,” she said.
Restoration of other historic California hotel properties can require up to $1 million per room, said hotel broker Alan Reay of Atlas Hospitality Group in Irvine. “No one’s going to lease it based on its hotel revenue,” he said, but on its post-renovation potential. The development hurdles are significant, including the city’s height limits, view restrictions and sea level rise.
“I can’t think of a better opportunity that exists in California,” said Reay, noting the risk in such deals as the years-long renovation of the historic Miramar Hotel in Montecito. “It’s a prime example that has chewed up a lot of very wealthy people.”View Our User Comment Policy
I hope that Noreen Goodman will stay on at the International Hair Spa. She’s been in the business of making people feel good about themselves for 32 years! ???
Woody!!! I hope you get to run things at the hotel through any potentially active transition.
You’ve kept the wheels on for 30 years there!
I know the owner of this gem. She and her family lived across the street from me when we moved here and her kids (older than my kids) were good to my kids. It is her property, so everyone else needs to cut the sh*t.
But I do not claim to know the ins and outs or the minutae of local politics around prime real estate.
Good! The Anderson family has run this property into the ground for decades! They’ve had their chance to run this place and now they need to bow out. This should be the coolest, hippest hotel in California with it’s location and old school feel, but every Laguna local knows this property is rundown and poorly maintained. From smelly corridors and elevators to noisy, dilapidated rooms to indifferent service, we’ve given this place dozens of chances over 30 years and it’s underwhelmed all of us over and over. Read the horror stories on Yelp and more. I can’t think of a better steward than Greg MacGillvray and his team. Laguna needs this place to revitalize. I hope the city cuts works with them and cuts the red tape.
this anderson family needs to step down the service is pathetic and the rooms a disgrace it needs a new look to be what laguna desrves / i wont be able to eat there anymore after price increases but at least it will look good
I hope this great hotel(of which I Performed at Years ago Singer/Songwriter) gets Landmark Respect and as it Should.it is A Family Member of Southern California and LAGUNA Beach,this Landmark Award should also be Given to the South Coast Movie house Opened in 1923 by Douglas Fairbanks and Mary Pickford. Some things in life are “Priceless’. this town Needs a Shuttle History tour, the Public would Love it !
many years ago with Robert Wyland, I worked at Producing a Video of Laguna Beach History and it’s Great Creative Contribution to California, we got Lots of Political Reasons and Road blocks as to why no one Would help us or Fund this Great Idea! hard to believe but True.
[…] tried not to panic over the Indy story “Lawsuit Contests Hotel Laguna Lease.” Hotel operators allege being illegally forced out by the property owners. The property […]
From Thomas Schofield let me tell you all a few kind words Mr Andersen trained me to be the hospitality professional I am today! It started at hotel laguna he was a great mentor! Today I work at the fabulous Julia Morgan ballroom here in (libral tech savy) San Francisco we get top notch ratings here we had El Celler de can Roca at our ballroom they picked the best of our service staff to serve the event.so, Claes Andersen was one of great many mentors in my life I have given great service when I worked at hotel laguna! I feel like you haters are talking crap about me because I worked here! You can book an event here in San Francisco got $100,000? Hmmmm? Didn’t think so sweety!
So many happy memories from summer fun and walks through the pageant shows, to special milestone birthday parties. But especially the extending time I spent at the hotel working on my first book “Facelifts, Money & Prince Charming.” I stayed in the same room my folks always booked Room 205. I think their spirit was with me as I shaped the Book’s content. “Facelifts, Money & Prince Charming” became a #1 Amazon Best Seller.
No new shiny place can replace the caring people and homeyness of this hotel.
My wife and I and Tinky too were guests at the Hotel Laguna for 11years.We also were booked in the same room all that time..Memories that can never be forgotten. I live and work in Vegas, which now is a corporate city.Big hotels every were, terrible customer service.Hotel Laguna can outshine any Vegas hotel for customer service and hospitality. We had a guardian angel always look out for us for all those years and made our stay always memorable. I wish the best for all the staff and our guardian angel Pam
When I stated working in Las Vegas in 1993 it was great living and working there. Everyone new you by your first name. Then they wanted to become a big city. We had to find a runaway vacation spot and we found the Hotel Laguna. Friendliest Hotel on the planet. The Hotel Laguna can teach Vegas how to run hotels with great hospitality and customer service.The closing of Hotel Laguna is like a dagger through my heart.Best wishes to all
[…] in 1973 and control nearly an entire block of waterfront land south of the hotel. A lawsuit contesting the lease terms says the Merritt family made a new deal with a trio of local business owners. The […]
First learned of this hotel in 1969. Lived n Laguna, behind KFC on Sleep HollowDrive, while assigned to USMC Air Station at El Toro. Have stayed at the hotel many times since. Agree that it needs upgrading but iconic property. Few things better than a drink on the deck at night, with surf crashing. I hope it is preserved.
I’ve been a Beach club Member for year and felt it was poorly managed. Stefan, the GM, didn’t get things done, did not address things and in my opinion lacked the hospitality acumen to run a hotel. Now I understand how we got the job, nepotism. I side with the owners for making a management change. Please bring back our Beach Club soon.
I spend the majority of 2010 at the Laguna Hotel. I thought the hotel was great and the GM (Michelle) did an excellent job considering the owner probably did not allow very much of a budget for improvements. (just assuming a real small budget but do not know 100%)
The employees from the front desk to basement always had a smile on and seemed pretty happy to have their jobs. I hope the hotel is brought back on line real soon, with or without the lady that shut it down. The charm and old time grace of the hotel will be with me forever!
Very sad situation as our family has been going there since the early 60’s. We have many great memories here. Hopefully things will get worked out so we can continue to enjoy time in Laguna Beach again.
Where are all the people that want to “pay forward”? Just 50 million or so could put the hotel back in business with all the charm and grace of yesteryear. Music on the patio, music in the court yard, great food and wine with a clean comfortable room would be heaven. Central air and balcony’s on the ocean facing rooms. Reasonable fees for room massages would be a real plus..It would stay booked for years and years.. It could happen, I would love it! (ok so I like to dream good dreams)
Hopefully all this results in a full renovation like the Ocean House received in Westerly Rhode Island. It should be the crown jewel of Laguna and ranked with some of the 4/5 diamond historic properties it belongs to be a part of.
The people who ran this hotel did a wonderful job! My children and I stayed their over and over for our getaways and only stayed there due to the originality of it! We loved the older feel…there’s nothing like it! I can’t stand businessmen who just wait to suck money out of something so historic! My family and I are saddened to see this. It’s about the people, not the money or what they can get out of it! Shame on the owners for what they did to someone who ran it for 30 years. We will let people know NOT to stay in anything new there..and we know the whole town!