RLJ Lodging Trust made its first move to make good on its promise to pay down debt and disposing of non-core, higher-value assets on Friday by announcing the sale of the 383-room Fairmont Copley Plaza in Boston for US$170 million, or approximately $444,000 per key. The name of the buyer of this first legacy asset acquired by RLJ when it merged with FelCor Lodging Trust has not been disclosed, but analysts suspect due to the trophy nature of the property that it is likely high net worth or foreign capital.
“The disposition of this asset is consistent with our objectives of selling non-core assets and unlocking shareholder value,” commented RLJ President and CEO Ross Bierkan. “Our ability to sell this asset shortly after closing the merger (with FelCor Lodging Trust) highlights the team’s focus on executing our key priorities in a disciplined manner. We remain committed to our disposition strategy, and we look forward to announcing further asset sales as they materialize.”
The sale price represents approximately a 4.6% capitalization rate on the hotel’s 2017 projected net operating income. The sale price, which is accretive to the company’s implied EBITDA multiple, represents a hotel EBITDA multiple of approximately 16.5x based on the hotel’s 2017 projected hotel EBITDA.
“We expect investors to view this announcement positively from both a qualitative and quantitative perspective, although we view the qualitative benefits (i.e., execution of post-merger strategy) as more important given still-negative investor sentiment and some corresponding skepticism about pricing and timing of potential dispositions,” said Michael Bellisario, senior research analyst with R.W. Baird.
The Fairmont Copley Plaza was acquired by FelCor in August 2010 for US$98.5 million from Fairmont with a long-term management contract, which has an initial expiration in 2030 with two 10-year extensions at Fairmont’s option. FelCor spent more than US$30 million in 2011-2012 renovating the guest rooms, fitness center and restaurant. The hotel generated RevPAR of US$248 in 2016.
“We expect investors to view this announcement positively from both a qualitative and quantitative perspective, although we view the qualitative benefits (i.e., execution of post-merger strategy) as more important given still-negative investor sentiment and some corresponding skepticism about pricing and timing of potential dispositions,” said Michael Bellisario, senior research analyst with R.W. Baird.