Hilton to use proceeds from Waldorf sale to buy five hotels

Hilton Worldwide is swapping one hotel for five more. The McLean, Va.-based hotel company says it has purchase agreements in place for the Hilton Orlando Bonnet Creek, Waldorf Astoria Orlando, The Reach and Casa Marina Waldorf Astoria Resorts in Key West and Parc 55 in San Francisco (pictured) for a total sum of $1.76 billion. The five properties represent 2,984 rooms.

The news comes after the announced closing of the Waldorf Astoria New York sale to Anbang Insurance Group Co. for $1.95 billion.

The Parc 55, which represents over one third of the purchased portfolio by number of rooms, will be a new addition to the Hilton Hotels & Resorts brand that will be managed by Hilton Worldwide. It is currently operated under the Wyndham flag.

The other acquired hotels are currently managed by Hilton Worldwide.

As part of its long-term relationship with Anbang, Hilton Worldwide will continue to operate the Waldorf Astoria New York under a 100-year management agreement.

“These transactions will enable us to unlock the embedded value of the Waldorf Astoria New York and acquire great institutional quality assets that we expect will drive significant incremental value for the company,” said Christopher Nassetta, president and CEO, Hilton Worldwide. “Our relationship with Anbang will ensure the Waldorf Astoria New York will continue to be a marquee hotel for the Waldorf brand long into the future, and will enable Hilton Worldwide and Anbang to build on the hotel’s rich legacy and traditions.”

The five hotels to be acquired with the proceeds from the sale of the Waldorf Astoria New York are expected to be part of a like-kind exchange under Internal Revenue Code Section 1031. Simply put: Whenever one sells an investment property and there is a gain, one generally has to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows one to postpone paying tax on the gain if the proceeds are reinvested in similar property as part of a qualifying like-kind exchange.

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The total purchase price of these five hotels of $1.76 billion represents approximately 13x the midpoint of the five properties’ combined full-year forecasted 2015 Adjusted EBITDA of between $132 million to $138 million.

Hilton Worldwide said it expects that these hotels will not require meaningful incremental capital expense in the near term. Hilton Worldwide expects to close on the purchase of these five hotels this month.

More to come from Hilton: The approximately $100 million that’s left of the proceeds from the Waldorf sale will be used to buy additional properties within the next six months, according to the statement.

 

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