Park Hotels & Resorts Executes Definitive Contracts to Sell Two of Its San Francisco Hotels and Provides an Update on Hotel Reopenings and Operating Trends
TYSONS, Va., July 13, 2021 (GLOBE NEWSWIRE) — Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE:PK) 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.
Operational Update
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.”
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements related to Park’s current expectations regarding use of proceeds from the sale of properties. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as the words “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “hopes” or the negative version of these words or other comparable words. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect its results of operations, financial condition, cash flows, performance or future achievements or events. Currently, one of the most significant factors continues to be the adverse effect of COVID-19, including possible resurgences, on the Company’s financial condition, results of operations, cash flows and performance, its hotel management companies and its hotels’ tenants, and the global economy and financial markets. COVID-19 has significantly affected the Company’s business, and the extent to which COVID-19 continues to affect the Company, its hotel managers, tenants and guests at the Company’s hotels will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its effect, the emergence of virus variants, the efficacy, availability and deployment of vaccinations and other treatments to combat COVID-19, including public adoption rates of COVID-19 vaccines, additional closures that may be mandated or advisable even after the reopening of certain of the Company’s hotels on a limited basis, whether due to an increased number of COVID-19 cases or otherwise, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements and Park urges investors to carefully review the disclosures Park makes concerning risk and uncertainties in Item 1A: “Risk Factors” in Park’s Annual Report on Form 10-K for the year ended December 31, 2020, as such factors may be updated from time to time in Park’s filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Except as required by law, Park undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
About Park Hotels & Resorts
Park is the second largest publicly traded lodging REIT with a diverse portfolio of market-leading hotels and resorts with significant underlying real estate value. Park’s portfolio currently consists of 57 premium-branded hotels and resorts with over 32,000 rooms primarily located in prime city center and resort locations. Visit www.pkhotelsandresorts.com for more information.
For more information, contact:
Ian Weissman
Senior Vice President, Corporate Strategy
571-302-5591
iweissman@pkhotelsandresorts.com
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www.pkhotelsandresorts.com
