Park Hotels & Resorts has entered into two separate, definitive contracts to sell the 360-room Le Meridien San Francisco and the 171-room Hotel Adagio, Autograph Collection (San Francisco, CA) for total proceeds of US$303.5 million, or an average sale price of approximately US$572,000 per key.
Once these two dispositions are completed, Park will have exceeded its stated goal of selling US$300 million to US$400 million of hotels in 2021, with ear-to-date disposition efforts totaling approximately US$477 million of gross proceeds.
Park also stated on Tuesday that demand continues to improve and expects to break even at the corporate level in June – an improvement from the US$15 million burn rate achieved in May. Occupancy at its 50 consolidated hotels increased from 32.6% in March to an estimated 49.8% in June, while reaching an estimated 59% for hotels opened for the entire month of June. Top performing markets during the month of June included Key West (91.8% occupancy), Hawaii (85.5%) and Southern California (75.3%).
Park also announced that it reopened the 1,544-room Hilton Chicago on June 10, bringing its total open portfolio to 54 out of 57 hotels.
In the two sales announced on Tuesday, when adjusted for Park’s anticipated capital expenditures, the blended sale price represents a 6.1% capitalization rate on 2019 net operating income (6.7% excluding capex), or 14.4x 2019 EBITDA (13.2x excluding capex). Management currently expects each of the transactions to close within the next 60 days.
Gross proceeds for the Le Meridien San Francisco are US$221.5 million, or approximately US$615,000/key. When adjusted for Park’s anticipated capex, the sale price equates to a 5.9% capitalization rate on 2019 net operating income (6.5% excluding capex), or 15.0x 2019 EBITDA (13.7x excluding capex).
Gross proceeds for the Hotel Adagio are US$82 million, or approximately US$480,000/key. When adjusted for Park’s anticipated capex, the sale price equates to a 6.6% capitalization rate on 2019 net operating income (7.1% excluding capex), or 13.0x 2019 EBITDA (12.2x excluding capex).
Following the sale of both hotels, Park’s exposure to San Francisco will decrease by 210 basis points to 14.6% based on 2019 pro-forma Hotel Adjusted EBITDA.
Once complete, the transactions will bring the total number of assets sold or disposed of since spinning off from Hilton in January 2017 to 29, with total gross proceeds of approximately US$1.7 billion.
