CHICAGO—Strategic Hotels and Resorts Inc. has announced the closing of the sale of the Marriott London Grosvenor Square hotel and the acquisition of the remaining 50 percent ownership interest in the Fairmont Scottsdale Princess. Combined with the previously completed sale of the Four Seasons Punta Mita resort, the company successfully executed over $715 million in transactions in the first quarter of 2014.
The company closed on the sale of the 237-room Marriott London Grosvenor Square hotel for $207.7 million, or approximately $877,000 per key. Net proceeds from the transaction total approximately $96.5 million, after the repayment of property-level net debt of $111.3 million. The hotel was sold to an affiliate of Hong Kong based private equity firm Joint Treasure and remains subject to a ground lease with 43 years remaining on the term. The company was advised by JLL on the sale of the hotel.
“By closing on the sale of the the Marriott London Grosvenor Square, we are finalizing our exit of the European market, as previously committed,” said Raymond L. “Rip” Gellein, chairman and chief executive officer of Strategic Hotels and Resorts. “In addition, this sale will eliminate approximately $1 million of annual frictional costs associated with the asset and allow us to redeploy capital into one of the highest growth assets in our portfolio.”
The company also closed on the acquisition of the remaining 50 percent ownership interest in the 649-room Fairmont Scottsdale Princess resort for approximately $90.6 million. Prior to the transaction, the company owned a 50 percent ownership position in the asset through a joint venture with an affiliate of Walton Street Capital LLC. The transaction values the asset at a gross value of $307.5 million and includes the assumption of the existing $117 million mortgage financing. As part of the transaction, the company earned a promoted interest that was negotiated during the 2011 restructuring of the asset totaling $19.3 million, resulting in a net purchase price of approximately $288 million.
“The Fairmont Scottsdale Princess is one of our highest growth assets as the resort continues to benefit from the addition of 60,000 square feet of new meeting space as well as improving market trends in the greater Phoenix/Scottsdale market. In fact, since the introduction of new meeting spaces and other amenities, group RevPAR penetration at the resort has increased nearly 17 points,” Gellein said. “We are pleased to essentially match-fund this acquisition with the proceeds from the sale of the Marriott London Grosvenor Square, allowing us to execute this acquisition without requiring us to raise external capital. On a full-year basis, the two transactions are essentially neutral to our earnings per share and marginally deleverage the balance sheet. Our nearly three year partnership with Walton Street, who assisted us in recapitalizing the resort in 2011, has been both a rewarding and profitable experience, and we appreciate their support and partnership.”
The net purchase represents a $444,000 per key valuation, a 12.7 times multiple on forecasted 2014 EBITDA and a 6.5 percent capitalization rate on forecasted 2014 NOI. In 2013, RevPAR grew 15 percent at the property resulting in 48 percent EBITDA growth.