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Hyatt Ups Asset-Light Strategy, Begins Efforts to Sell $1.5 Billion in Hotel Properties

Sale of Two Phoenix Properties Continues Effort To Lighten Asset Load in Favor of Fee Income

Having met its goal of becoming a net seller of hotel properties in 2017, Hyatt Hotels Corp. (NYSE:H) has decided to extend that strategy for another three years. The international hotelier intends to dispose of at least $1.5 billion of properties in that time, and just this month completed the first sales toward that goal.

“With the recent sale of two hotels and the completion of nearly $250 million of share repurchases in the third quarter, we are fulfilling our commitment to be a net seller of assets in 2017 and return substantial capital to shareholders,” said Mark S. Hoplamazian, president and CEO of Hyatt. “Looking ahead, we plan to extend this strategy to sell roughly $1.5 billion of real estate over the next three years, which we are confident will unlock additional shareholder value and drive the growth of our business.”

This month, Hyatt sold two of its Phoenix-area hotels to Orlando-based REIT Xenia Hotels & Resorts for $305 million, or about $498,000 per room.

The two properties, totaling 612 room overs 704,004 square feet, were the Hyatt Regency Scottsdale Resort & Spa at 7500 E. Doubletree Ranch Rd. in Scottsdale and the Royal Palms Resort & Spa at 5200 E. Camelback Rd. in Phoenix. [For more details, please refer to CoStar COMPS #4020535.]

“Our recent sale of the Hyatt Regency Scottsdale and Royal Palms Hotels is our first step toward our staged disposition effort and we expect to be very active on this front in 2018,” Hoplamazian added.

The company did not identify the specific properties marked for disposition but noted that owned real estate is broadly being valued by investors at EBITDA multiples in the high-single to low double-digit range which, in the company’s view, does not fairly reflect the market value of its portfolio based on what it has been able to achieve in sales.

“The recent sales of the Hyatt Regency Scottsdale and Royal Palms for gross cash proceeds of $305 million was our first step in this sell down,” said Patrick Grismer, CFO of Hyatt Hotels. “We sold those assets at a blended multiple EBITDA multiple of 12.6, so that transaction compared to how investors are valuing our total owned and leased EBITDA stream today, was solidly accretive, and I think is a good example of the types of transactions we have in mind as we march down this path.”

“We believe this asset disposition program will unlock shareholder value, first by monetizing lower yield higher multiple assets, whose cash flows are not fairly valued by investors. Second, by providing substantial funds for future growth investments and return of capital to shareholders. And third by accelerating the evolution of Hyatt’s earnings profile towards more fee-based earnings,” Hoplamazian said.

Earlier this year in the U.S., Hyatt sold its Hyatt Regency Louisville (KY) for $65 million, which resulted in a pre-tax gain of $35 million.

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