Host Hotels & Resorts acquires Hotel Van Zandt and sells Sheraton Boston
BETHESDA, Maryland, Feb. 2 10, 2022 (GLOBE NEWSWIRE) — Host Hotels & Resorts, Inc. (NASDAQ: HST), the nation’s largest real estate investment firm (the “Company”), today announced the acquisition of the fee interest single in the Van Zandt Hotel, a 319-room luxury lifestyle hotel in Austin, Texas, for a purchase price of approximately $246 million, including its $4 million FF&E stash. Net acquisition price of approximately $242 million represents a multiple of 13.2x on 2019 EBITDA1 and stabilization is expected by 2025-2027 at around 10-12x EBITDA1.
The Company financed the acquisition with proceeds of approximately $140 million from recent divestitures and assumed approximately $101.5 million of existing secured debt. The debt matures in 2027 and the interest rate is fixed at an annual rate of 4.67%.
This newly built hotel opened in 2015 with rooms ranging from 330 to 1,100 square feet, including 52 suites. The hotel offers 13,000 square feet of indoor meeting space and three F&B outlets, including a rooftop pool bar and full-service restaurant with a stage and evening live music.
The Van Zandt Hotel is conveniently located in Austin’s Rainey Street neighborhood, downtown’s most popular entertainment district. Buoyed by the relocation of several Fortune 500 corporate headquarters, Austin is the third fastest growing city in the past decade and its population is expected to grow another 30% by 2029. The Rainey Street Submarket is set to benefit from several nearby mixed-use developments. currently under construction or in planning, as well as the $1.2 billion convention center expansion, located within walking distance of the hotel.
In addition to acquiring the Van Zandt Hotel, the company also announced that it had sold the 1,220-room Sheraton Boston for approximately $233 million. Sale price represents an EBITDA multiple of 14.2x2 on 2019 EBITDA, which includes approximately $135 million of estimated capital expenditures not realized over the next five years. As part of the sale, the Company is granting a bridge loan of $163 million to the buyer.
James F. Risoleo, President and CEO, said, “We are thrilled to add a second hotel in Austin to our portfolio with Hotel Van Zandt. The hotel is well located and does not foresee any short-term investment in a market with multiple demand drivers and a history of strong RevPAR growth. Additionally, the sale of the Sheraton Boston allowed us to redeploy capital into other assets which we believe will strengthen the EBITDA growth profile of our portfolio. We continue to be very active on the capital allocation front as we target new growth markets in the US. Since the start of 2021, we have invested $1.6 billion in early-cycle acquisitions. The blended EBITDA multiple of our seven hotel acquisitions is 13.0x3which compares favorably to the nearly $1 billion generated, including amounts due under vendor financing, from our seven hotel divestitures at 15.4x2 Multiple of EBITDA including estimated lost capital expenditures.
About Host Hotels and Resorts
Host Hotels & Resorts, Inc. is an S&P 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upscale hotels. The Company currently owns 75 properties in the United States and five properties internationally totaling approximately 44,400 rooms. The Company also holds non-controlling interests in six domestic joint ventures and one international joint venture.
Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements are identified by their use of words and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may” , “should”, “plan”. “, “predict”, “project”, “will”, “continue” and other similar terms and expressions, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: the duration and extent of the COVID-19 pandemic and its short- and long-term impact on travel demand, passenger and group activity, and levels consumer confidence; measures taken by governments, businesses and individuals in response to the pandemic, including limiting or banning travel; the impact of the pandemic and measures taken in response to the pandemic on global and regional economies, travel and economic activity, including the duration and magnitude of its impact on unemployment rates, business and consumer discretionary spending; the pace of recovery as the COVID-19 pandemic subsides; general economic uncertainty in the US markets where we have hotels and worsening economic conditions or low levels of economic growth in such markets; other changes (outside of the COVID-19 pandemic) in national and local economic and business conditions and other factors such as natural disasters and weather conditions that will affect our hotel occupancy rates and demand hotel products and services; the impact of geopolitical developments outside the United States on accommodation demand; volatility in global financial and credit markets; operational risks related to the hotel business; the risks and limits to our operational flexibility associated with the level of our indebtedness and our ability to meet the covenants of our debt agreements; risks associated with our relationships with property managers and joint venture partners; our ability to optimally maintain our properties, including meeting capital expenditure requirements; the effects of hotel renovations on our hotel occupancy and financial results; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; risks associated with our ability to complete acquisitions and divestitures and develop new properties and the risks that acquisitions and new developments will not proceed in accordance with our expectations; our ability to continue to satisfy complex rules in order for us to remain a real estate investment trust for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. Although the Company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, it cannot guarantee that the expectations will be achieved or that any deviations will not be material. All information contained in this release speaks as of the date of this release and the Company undertakes no obligation to update any forward-looking statements to conform to actual results or to changes in the Company’s expectations.
1 In accordance with industry practice, we calculate the EBITDA multiple as the ratio of the purchase price to the property’s EBITDA. EBITDA is a non-GAAP measure. The GAAP measure comparable to the multiple of EBITDA is the ratio of purchase price to net profit. The purchase price to net earnings ratio for 2019 is 22.4x based on net earnings of $11 million. The purchase price to stabilized net earnings ratio is 15.8x based on an expected stabilized net earnings of $15 million. The difference between net earnings and EBITDA corresponds to an amortization charge of $7.5 million for both periods. The stabilized results are only illustrative. Our ability to achieve 2025-2027 results is subject to various uncertainties and actual results may differ materially.
2 Disposal multiples are calculated as the ratio of sale price (plus estimated avoided capital expenditures) to 2019 EBITDA. Sheraton Boston’s purchase price to 2019 net income ratio is 18.2x . The Sheraton Boston net income in 2019 is $13 million and the difference between net income and EBITDA is a depreciation charge of $13 million. The purchase price to net income ratio for the combined 2021 and 2022 disposals is 24.4x and estimated avoided capital expenditures over the five years from the date of disposal totaled $290 million. The combined net income from the 2021 and 2022 disposals is $40 million and the difference between net income and EBITDA is amortization expense of $42 million.
3 Blended EBITDA multiple is based on 2019 operations of Hyatt Regency Austin, Four Seasons Resort Orlando at Walt Disney World® Resort and Hotel Van Zandt and 2021 guidance upon acquisition of Baker’s Cay Resort and Alila Ventana Big On, because these hotels have undergone renovations. disruptions and closures in 2019. Estimated normalized operations for 2019 were used for The Laura Hotel, assuming a new manager and rebrand, and for The Alida, Savannah, taking into account construction disruptions in the surrounding neighborhood of Plant Riverside and the initial ramp-up of hotel operations. . The weighted purchase price to net earnings ratio for these acquisitions is 21.1x, using net earnings of $74 million. The difference between the combined net income and the EBITDA corresponds to an amortization charge of $46 million. In addition, EBITDA includes an upward adjustment of $13 million to reflect normalized operations of The Laura Hotel and The Alida, Savannah.