WASHINGTON, DC—The REIT doesn't want to invest in a renovation but someone else clearly doesn't mind, Marc Magazine tells GlobeSt.com's Erika Morphy.
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Erika Morphy |
erikamorphy |
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Updated on April 21, 2016
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WASHINGTON, DC—Orlando, FL-based Xenia Hotels & Resorts has sold one of the three hotels it owns in the Washington DC area, it announced on Wednesday. The 220-room DoubleTree by Hilton traded for $65 million. Xenia did not reveal the seller. Xenia still owns two other properties in the area — the Hilton Garden Inn Washington DC and the Lorien Hotel in Alexandria, VA — and it pointed to them as evidence it still see value in the local hospitality market. The self-administered REIT’s invests in premium full service, lifestyle and urban upscale hotels that are typically located in the 25 US lodging markets. While the company believes in the long-term strength of the Washington DC market, CEO Marcel Verbaas said in a prepared statement, “the sale of this asset allowed us to reduce our exposure in the market, as well as monetize a portion of the upside of a potential repositioning of the hotel without taking the operational risk associated with the significant required renovation.” The DoubleTree by Hilton sale, Verbaas also said, is a capital allocation play “of harvesting value from lower-quality assets in the portfolio that may have significant near-term capital requirements.” So Xenia did not want to invest in the renovations necessary to get more value out of the property. That is okay, Marc A. Magazine, executive managing director of Savills Studley’s Hospitality Group told GlobeSt.com – obviously another company is willing to take that risk. A year or eighteen months ago that might not have been the case. “This is another transaction demonstrating the strength of the Washington DC market and the desire by property owners to upgrade their existing hotels into a more up-to-date format,” he said. Xenia reported that $65 million sales price represents a 15.7x multiple on its 2015 EBITDA and a 5.5% cap rate on 2015 net operating income It plans to use the proceeds for general corporate purposes including possibly to fund an existing $100 million share repurchase authorization, to pay down debt or to make further acquisitions.
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