Hyatt plans large-scale asset sales in 2018
Hyatt plans large-scale asset sales in 2018
15 FEBRUARY 2018 4:46 PM

Officials with Hyatt Hotels Corporation said with the planned sale of a three-property portfolio, the company will be more than two-thirds of the way to selling $1.5 billion in assets by 2020. 

CHICAGO—Hyatt Hotel Corporation executives said they’re making significant progress on a plan to sell more than $1.5 billion in owned assets outside of the company’s established capital recycling program.

CFO Pat Grismer believes the company is close to passing the $1 billion mark.

During a call with investors and analysts Thursday, Grismer said the company has seen strong interest from potential buyers for a three-property portfolio, including the Andaz Maui at Wailea, the Grand Hyatt San Francisco and the Hyatt Regency Coconut Point Resort and Spa.

Combined with the already completed sale of the Hyatt Regency Scottsdale Resort & Spa and the Royal Palms Resort and Spa for $305 million, Grismer said the Andaz Maui and Grand Hyatt San Francisco sales would account for roughly $1 billion of the stated goal to sell off $1.5 billion in assets by 2020. The sale of the Hyatt Regency Coconut Point Resort and Spa would be calculated separately as part of the company’s ongoing asset recycling program, as is the recent $58 million sale of the Hyatt Regency Monterey Hotel & Spa.

Grismer noted the company was engaged with two different brokers on potential asset sales and was pleased with the first round of bids for the portfolio.

“We anticipate finalized agreement in the near future,” he said. “And we expect to close no later than the second quarter.”

President and CEO Mark Hoplamazian said interest in the properties has come from a diverse group of potential buyers, both domestic and international, and include both private equity and publicly listed companies.

“It’s across many different dimensions and is not particularly narrow at this point,” he said.

Hoplamazian said there seems to be interest in the assets Hyatt is marketing in part because they’re in desirable markets with high barriers to entry. Grismer noted that in deciding which properties to sell, Hyatt officials have targeted low-yield, high-multiple properties.

Both Grismer and Hoplamazian noted the sales show the company’s efforts to put greater emphasis on growth for its fee-based management and franchising businesses, though Hyatt intends to continue owning some assets.

Grismer said the ultimate proceeds of the asset sales should benefit from recent changes to U.S. tax law, but the company will see a short-term hit from the repatriation of some overseas capital.

The money raised via the asset sales will be used for a combination of acquisitions and investments in Hyatt’s overall business along with “returning capital to shareholders.”

Asked by analysts whether the company would start a second round of asset sales at the completion of the $1.5 billion in sales, Grismer said it’s too early to say.

“We’re not planning to do that at this state, and I think it would be premature to give guidance to that effect,” he said. “When we committed to this, we did so on the basis that this would be meaningful but preserve balance sheet capacity in a way that grows our business. We also felt that in an environment that can be so uncertain, that we should commit to something we had absolute confidence we could do.”

Q4 and full-year 2017 performance
Hoplamazian said he was pleased with the company’s fourth-quarter and full-year 2017 results, which included systemwide revenue per available room growth of 3.8% for the quarter and 3.3% for the year.

He noted the company had an “exceptionally strong” Q4 in terms of new rooms open, and it was the 11th consecutive quarter the company saw rooms grow at 6% or more.

All told, the company saw a record 71 hotels open during the year with net room growth of 7%.

Net income for the year was $249 million, a year-over-year increase of 22.3%, and adjusted earnings before interest, taxes, depreciation and amortization was up 3.9% to $816 million.

As of press time, Hyatt’s stocks were trading at $80.11 a share, a year-to-date increase of 7.4%. The Baird/STR Hotel Stock Index was up 4.5% for the same period.

2018 guidance
Hyatt officials are projecting systemwide RevPAR growth between 1% and 3% in 2018, although Grismer said the first quarter likely will be the weakest of the year for the company.

Other 2018 projections include:

  • net income between $176 million and $215 million;
  • adjusted EBITDA between $805 million and $825 million; and
  • $350 million in capital expenditures, $100 million of which will be spent on the repositioning of two Miraval resort properties, Grismer said.

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