Strategic Hotels & Resorts Sells The Marriott London Grosvenor Square Hotel
The transactions effectively complete the Company's exit from Europe and enhance its industry leading United States hotel portfolio
Strategic Hotels & Resorts, Inc. (NYSE: BEE), today announced two significant transactions: 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.
"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 & Resorts, Inc. "In addition, this sale will eliminate approximately $1.0 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," Gellein continued.
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, L.L.C. ("Walton Street"). The transaction values the asset at a gross value of $307.5 million and includes the assumption of the existing $117.0 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," said Gellein. "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," Gellein concluded.
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.
About the Company
Strategic Hotels & Resorts, Inc. is a real estate investment trust (REIT) which owns and provides value-enhancing asset management of high-end hotels and resorts in the United States and Europe. The Company currently has ownership interests in 16 properties with an aggregate of 7,865 rooms and 835,000 square feet of meeting space. For a list of current properties and for further information, please visit the Company's website at http://www.strategichotels.com.
Forward Looking Statements
This press release contains forward-looking statements about Strategic Hotels & Resorts, Inc. (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding the Company's future financial results, positive trends in the lodging industry and the Company's continued focus on improving profitability. Actual results could differ materially from the Company's projections. Factors that may contribute to these differences include, but are not limited to the following: the effects of economic conditions and disruption in financial markets upon business and leisure travel and the hotel markets in which the Company invests; the Company's liquidity and refinancing demands; the Company's ability to obtain, refinance or extend maturing debt; the Company's ability to maintain compliance with covenants contained in its debt facilities; stagnation or deterioration in economic and market conditions, particularly impacting business and leisure travel spending in the markets where the Company's hotels operate and in which the Company invests, including luxury and upper upscale product; general volatility of the capital markets and the market price of the Company's shares of common stock; availability of capital; the Company's ability to dispose of properties in a manner consistent with its investment strategy and liquidity needs; hostilities and security concerns, including future terrorist attacks, or the apprehension of hostilities, in each case that affect travel within or to the United States, Germany or other countries where the Company invests; difficulties in identifying properties to acquire and completing acquisitions; the Company's failure to maintain effective internal control over financial reporting and disclosure controls and procedures; risks related to natural disasters; increases in interest rates and operating costs, including insurance premiums and real property taxes; contagious disease outbreaks; delays and cost-overruns in construction and development; marketing challenges associated with entering new lines of business or pursuing new business strategies; the Company's failure to maintain its status as a REIT; changes in the competitive environment in the Company's industry and the markets where the Company invests; changes in real estate and zoning laws or regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines; and litigation, judgments or settlements.
Additional risks are discussed in the Company's filings with the SEC, including those appearing under the heading "Item 1A. Risk Factors" in the Company's most recent Form 10-K and subsequent Form 10-Qs. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. The forward-looking statements are made as of the date of this press release, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.