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Hyatt will fund its hunt for deals with property sales, President and CEO Mark Hoplamazian told analysts Thursday.
Hyatt Hotels Corporation is likely to be active on both ends of the deal-making process in the months to come, President and CEO Mark Hoplamazian said Thursday during the company’s second-quarter earnings call. Hoplamazian told analysts that, for instance, Hyatt is considering increasing its ownership stake in the Park Hyatt to 100% from its previously stated expectation of retaining a two-thirds stake in the 210-room hotel that will open in August. If Hyatt chooses to buy a 100% stake in the hotel, the purchase price would be between $385 million to $390 million, though Hoplamazian said such a deal remains under negotiation. The company’s expectation of a return on the project in the high single digits has not changed, he said. “The market in New York has been pretty healthy, especially for the top end of the market, which is where we will be playing, so that is encouraging,” he said. In addition to the Park Hyatt, the company is willing to consider other acquisition opportunities. Hyatt is targeting key gateway cities, resorts, urban select-service properties and convention hotels. Hyatt had a portfolio of 554 hotels as of 31 March. The company also would consider acquiring a portfolio of assets, though Hoplamazian said those sorts of deals are “few and far between.” “We are always looking for very good real estate and good brand representation in markets where we are underrepresented or don’t have representation,” he said. The capital to fund these deals will come from portfolio sales, Hoplamazian said. He said the company plans to bring to market a portfolio of 42 select-service properties to help aid in that effort to enhance shareholders’ investment. “Given values, we think this is the time to sell,” he said. Hoplamazian said the 42 hotels will be marketed as portfolios, though he said it is too early in the process to provide an update on how the sales process is proceeding. Responding to an analyst’s question, Hoplamazian said the properties are likely to be attractive to real estate investment trusts, non-listed REITs and private equity firms. He said Hyatt has had success selling to these types of buyers before. “I would say there’re diverse types of buyers out there with a significant capital base behind them,” he said, adding these buyers would also have the benefit of being able to easily obtain financing to help close any potential deals. Year to date through 30 July, Hyatt’s stock price was up more than 22%. By comparison, the R.W. Baird/STR Hotel Stock Index was up more than 11% through the same time period. |
