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Ashford Prime Making Progress on Lux Remake of Hotel Portfolio

REIT Plans to Convert Courtyard San Francisco to Marriott’s Autograph Collection; Lists Tampa Asset for Sale; Sells Plano Property

With one property divestiture in the books and a pair of others in the works, Ashford Hospitality Prime Inc. is moving ahead with its strategy to own solely luxury hotels and resorts.

The Dallas-based REIT has reached terms with Marriott to convert its Courtyard San Francisco Downtown hotel to an Autograph Collection property.

It also announced that it has listed the 293-room Renaissance Tampa for sale and has engaged The Placenia Group to market the property to potential buyers. At the end of last year, Ashford was carrying the hotel on its book at a value of $79.6 million.

The REIT has also completed the sale of its Marriott at Legacy Town Center in Plano, TX, hotel (pictured).

The agreement with Marriott calls for the Courtyard San Francisco to be converted to an Autograph hotel by December 2019 under a product improvement plan. The PIP is currently estimated to cost $30 million and includes updates to guestrooms, corridors, the building’s facade, lobby, restaurant and meeting space. Marriott will continue to manage the property after the conversion.

The company said that post-conversion, the new Autograph property should realize a $50 RevPAR premium to the current Courtyard hotel and that its incremental $30 million investment should yield a 20% unlevered internal rate of return.

Ashford Prime also closed on the sale of the 404-room Marriott Plano Legacy Town Center hotel for $104 million ($257,000 per room). The sales price represents a year-end 2017 all-in cap rate of 7.7% on net operating income.

The sale will reduce the company’s leverage and its interest expense by approximately $3.2 million annually. The hotel had an existing debt of $62.3 million that was paid off with an additional $22.7 million of debt pay down. Following the debt paydown, Ashford Prime realized a gain of $16 million.

“The Marriott Plano transaction is another significant step in the rationalization of our non-core hotel portfolio,” said Richard J. Stockton, Ashford Prime’s president and CEO. “As the Plano market is experiencing a significant amount of new supply that will likely negatively impact the Marriott Plano, our ‘rebuy’ analysis resulted in a lower unlevered and levered IRR than what we believe we can achieve by redeploying the proceeds.”

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