TYSONS, VA – July 13, 2021 – Park Hotels & Resorts Inc. today announced that it 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 $303.5 million, or an average sale price of approximately $572,000 per key. When adjusted for Park’s anticipated capital expenditures (“capex”), 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.
Le Meridien San Francisco
Gross proceeds for the Le Meridien San Francisco are $221.5 million, or approximately $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).
Hotel Adagio, Autograph Collection
Gross proceeds for the Hotel Adagio are $82 million, or approximately $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. Net proceeds from the sales will be used to partially repay debt currently outstanding on its one remaining bank term loan. Pro forma for the repayments, the Company expects to have approximately $80 million of corporate bank debt outstanding.
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 $1.7 billion.
The Company continues to witness encouraging improvements in demand, and now expects to break-even at the corporate level in June—an improvement from the $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 the Company reopened the 1,544-room Hilton Chicago on June 10th, bringing its total open portfolio to 54 out of 57 hotels, accounting for 90% of the Company’s total room count. The Company’s three remaining suspended hotels are currently expected to reopen over the next several months as demand recovers.
“I am incredibly pleased with our two upcoming dispositions in San Francisco, which are under contract at very attractive pricing, demonstrating the strong demand by institutional investors seeking high-quality hotels in urban markets,” commented Thomas J. Baltimore, Jr., Chairman and Chief Executive Officer of Park. “The upcoming sales of these two assets highlight our unwavering commitment to reducing leverage and prudently allocating capital. Once these two dispositions are completed, we will have exceeded our stated goal of selling $300 million to $400 million of hotels in 2021, with our year-to-date disposition efforts totaling approximately $477 million of gross proceeds. Operationally, we continue to witness strong demand trends across many of our core markets, while average RevPAR during the month of June exceeded 2019 levels at nearly 20% of our hotels within our consolidated hotel portfolio. Our portfolio’s performance over the past two months, along with sequential improvement expected to continue into July, has accelerated our expectations to break-even at the corporate level.”