Park Hotels & Resorts sells two properties in San Francisco for $ 303 million
Park Hotels & Resorts has sold two of its hotel properties in San Francisco in two separate transactions. The company sold Le Meridien San Francisco and the Hotel Adagio for a total of $ 303.5 million, a capitalization rate of 6.1% on 2019 net operating income, including capital expenses. The sale price is equivalent to $ 572,000 per key for the 531 room portfolio.
As a result of these sales, Park Hotels & Resorts San Francisco’s exposure will decrease by 210 basis points to 14.6%. The 360-room Le Meridien San Francisco sold for $ 221.5 million, a cap rate of 5.9% on 2019 net operating income, including capital expenditures. The 171-room Adagio hotel, Autograph Collection, sold for $ 82 million, representing a cap rate of 6.6% from 2019 operating income, adjusted for capital spending.
Park Hotels will use the proceeds from sales to repay the debt on its remaining term bank loan. Following the repayment, the company is expected to have $ 80 million in unpaid debt. Since Hilton’s split in 2017, the company has sold a total of 29 properties, including these two most recent transactions, for a total value of $ 1.7 billion.
Although the pandemic has depressed the hotel market, Park Hotel & Resorts is encouraged by improving demand this year. In the portfolio of 50 hotels, the occupancy rate fell from a low of 32.6% in March to around 49.8% in June. Insulating for open hotels, the occupancy rate rose to 59% in June. Key West, Hawaii and Southern California were the best performing markets with 91.8%, 85.5% and 75.3% occupancy rates, respectively.
There have been a handful of notable hotel deals since the market started to wake up. In addition to these two offers from Park Hotels & Resorts, last month Braemar Hotels & Resorts Between in an agreement to acquire Mr. C Hotel, a 138-room luxury hotel in Beverly Hills. In addition to the hotel, the transaction also includes five condominium residences adjacent to the property. The sale transaction is expected to close in July for $ 77.8 million. The hotel was priced at $ 65.4 million, while the condominiums cost $ 12.5 million.
The transaction is Braemar Hotels & Resorts’ first acquisition in the takeover cycle, and it is complex, involving PO units, warrants and mortgage debt. The investor plans to execute a value added strategy by maximizing the operating performance of the hotel.