Strategic Hotels & Resorts has bought the the portion of the Hotel del Coronado in the San Diego area that it doesn’t already own from joint-venture partner Blackstone Group, in a deal that reportedly values the property at $787 million.
The Chicago-based REIT will pay $210 million for the 63.6-percent stake, and assume an existing mortgage of about $475 million, Chicago-based Strategic said in a statement.
Blackstone bought a majority stake in the hotel in 2011 and formed a joint venture with Strategic and KSL Resorts to recapitalize the oceanfront resort. The Hotel del Coronado was valued at about $590 million at the time of that purchase, according to Strategic.
"We are thrilled to be acquiring the remaining equity position in the Hotel del Coronado and to have the opportunity to fully own this truly iconic hotel in the very attractive San Diego market. Our company has had an ownership interest in the Del since 2006 and served as asset manager throughout that period, giving us comprehensive knowledge of this multi-faceted resort," said Raymond L. "Rip" Gellein, chairman and CEO of Strategic Hotels & Resorts, Inc. "The Hotel Del is experiencing excellent growth in group and transient business, and is expected to outperform in the coming years given the lack of any new supply in the San Diego market. Further, the hotel is not encumbered by a long-term hotel management contract which creates additional flexibility and value as owner of this property."
The net purchase price represents a 14.3 times multiple on forecasted 2014 EBITDA and a 6.2 percent capitalization rate on forecasted 2014 NOI. Management estimates the to-be-acquired 63.6 percent interest in the hotel is projected to generate an incremental $19 million to $21 million of EBITDA for the remainder of 2014. In the first quarter of 2014, RevPAR grew 11 percent at the property resulting in 21 percent EBITDA growth. The transaction, which is subject to certain closing conditions, is expected to close in the second quarter of 2014.