Ahead of a planned April foreclosure auction and at a very attractive yield based on 2019 performance, Host Hotels & Resorts, Bethesda, Maryland, on Wednesday announced that it has acquired the fee simple interest in the 448-room Hyatt Regency Austin in Austin, Texas, for approximately US$161 million in cash. The deal marks the first Hotel REIT acquisition since the onset of the pandemic.
The purchase price paid by the largest lodging real estate investment trust in the United States represents a 10.0% capitalization rate and an 8.8x EBITDA multiple based on 2019 actual results and reflects a 20% to 25% discount to pre COVID-19 pricing based on comparable publicly-disclosed hotel sales. Hyatt will continue to manage the hotel under a long-term management agreement.
R.W. Baird analyst Michael Bellisario wrote on Wednesday, “The market appears to be ‘green lighting’ additional capital deployment, and this deal will be the reference point for subsequent transactions.”
James Risoleo, president and CEO for Host, said, “We are excited to have executed an off-market, opportunistic acquisition of a high-quality hotel in one of the nation’s fastest growing cities, which continues to be a top beneficiary of corporate and people relocation. As travel resumes, we expect the well-located Hyatt Regency Austin to benefit from a strong rebound led by Austin’s multiple leisure and business demand drivers that are anchored in world-renowned music festivals, sporting events and blue-chip corporations. Additionally, we are encouraged by the reported contraction in Austin’s hotel construction pipeline relative to pre-pandemic levels and by the market’s significantly lower hotel operating costs compared to other markets. We expect this acquisition to raise our EBITDA growth profile, while positively enhancing our geographic diversification by adding a market with a thriving economy and a young and vibrant population.”
Risoleo continued, “Our goal is for the Hyatt Regency Austin to exceed 2019 levels of revenues and EBITDA on a stabilized basis as Hyatt leverages Host’s data-driven asset management and enterprise analytics platforms to drive incremental expense reductions and productivity improvements at the hotel.”
The 670,000 square-foot property had a rooms renovation in 2015 and a meeting space expansion in 2015 and renovation in 2018. The hotel offers, among other things, 45,000 square feet of total meeting space (including ballrooms of 14,000 and 10,000 square feet).
Host Hotels & Resorts currently owns 76 properties in the United States and five properties internationally totaling approximately 46,800 rooms. The Company also holds non-controlling interests in six domestic and one international joint ventures.