NEW ORLEANS — Park Hotels & Resorts Inc. (NYSE: PK) (“Park” or the “Company”) today announced that it has closed on the sale of the 97-room W New Orleans – French Quarter (the “Hotel”) located in New Orleans, LA, for gross proceeds of approximately $24.1 million, or $249,000 per key. When adjusted for Park’s anticipated capital expenditures (“capex”), the sale price represents a 4.3% capitalization rate on the Hotel’s 2019 net operating income (5.8% excluding capex), or 17.9x the Hotel’s 2019 EBITDA (13.3x excluding capex). Proceeds from the sale will be used to repay debt.
The sale of the Hotel marks the 25th non-core hotel that Park has sold or disposed of since its spin-off from Hilton in January 2017, with gross proceeds from these 25 hotels totaling over $1.2 billion. Since the Company’s acquisition of Chesapeake Lodging Trust in September 2019, it has now sold six non-core hotels as part of its ongoing strategy to de-lever its balance sheet and transform its portfolio.
Park also announced that the Company recently reopened three West Coast hotels due to improving demand trends in their respective markets. The 360-room Le Meridien San Francisco and the 171-room Hotel Adagio, Autograph Collection, both located in San Francisco, as well as the 850-room DoubleTree Hotel Seattle Airport, all reopened in late March. Park now has 52 out of 59 hotels open, accounting for nearly 80% of the Company’s total room count. The Company’s seven remaining suspended hotels are currently expected to reopen over the next couple of quarters as travel restrictions ease and demand recovers.
The Company continues to witness encouraging improvements in demand, with occupancy at its consolidated hotels increasing from 21% in January to nearly 33% in March, while the portfolio achieved positive EBITDA in March with nearly half of all open consolidated hotels generating positive EBITDA. Park’s hotels located in leisure-oriented destinations or submarkets have recorded strong increases in leisure demand over the latter half of the first quarter and into the second quarter. As a result of the recent strong performance, Park’s monthly burn rate decreased to $26 million in March from the average monthly burn rate of $42 million the company reported during the fourth quarter 2020.
“I am pleased to announce our first non-core asset sale since the onset of the COVID-19 pandemic at very strong pricing amidst encouraging buyer demand for premium, well-located hotels in markets with high barriers to entry,” stated Thomas J. Baltimore, Jr., Chairman and CEO of Park. “The sale of the W New Orleans – French Quarter helps to streamline our portfolio to focus our resources on our larger assets as well as reduce our exposure in a market where we already have a strong presence with our 1,622-room Hilton Riverside hotel. We remain laser-focused on executing on our strategic priorities, including reopening our hotels, reducing our burn rate and further de-levering our balance sheet, as we enter a promising period of demand recovery over the coming months. Operationally, leisure demand trends continue to improve at a faster pace than we had initially anticipated, with a broader based recovery across all demand segments expected over the back half of 2021 and well into 2022.”
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 59 premium-branded hotels and resorts with over 33,000 rooms primarily located in prime city center and resort locations. Visit www.pkhotelsandresorts.com for more information.