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Xenia Sells Another Local Hotel

WASHINGTON, DC—But it doesn't sound as though the REIT is finished with the region. Tom Brennan, the former SVP of Asset Management with the JBG Cos., has joined the company as SVP of Asset Management.

By Erika Morphy | erikamorphy | | Updated on May 31, 2016
Embassy Suites Hunt Valley Embassy Suites Hunt Valley
WASHINGTON, DC—Last month Orlando, FL-based Xenia Hotels & Resorts sold one of the three hotels it owns in the Washington DC area — its 220-room DoubleTree by Hilton, which traded for $65 million to the San Francisco-based KHP Capital Partners . The REIT has since divested itself of another local asset — the Embassy Suites Hunt Valley, located in a Baltimore submarket, for $20 million. The sales price represented an 8.4 times multiple on 2015 EBITDA, according to comments CEO Marcel Verbaas made during the company’s recent earnings call. The sale of the DoubleTree by Hilton in DC represented a 15.7 times multiple on actual 2015 EBITDA, he also said. Xenia appears to be in disposition mode — which Verbaas in fact confirmed during the call. “We continue to evaluate a number of additional potential dispositions, and we’ll provide an update on the progress when appropriate,” he said. But is there something about the Washington DC/Baltimore hotel market that Xenia doesn’t like, at least at this phase of the cycle? He says no. The company believes in the long-term strength of the Washington DC market, Verbaas said in a prepared statement when the DoubleTree by Hilton sold although he did note that “the sale of this asset allowed us to reduce our exposure in the market..” The overriding factor, though, appears to be the opportunity to monetize its assets without investing in the necessary upgrades to capture its full value, as Verbaas said at the time. DoubleTree by Hilton Sale Began as a Reverse Inquiry As it happens, the DoubleTree DC was a reverse inquiry, Verbaas said during the earnings call — meaning it hadn’t set out to market the asset. (per Fair Disclosure transcript):
It was a situation where we had thought about potentially selling the hotel, we had really looked at a wholesale analysis and looked at the upcoming capital investment that would be necessary to potentially reposition that hotel, and with the reverse inquiry, we thought there clearly was sufficient amount of interest in doing something with the hotel that had those characteristics.

Positive RevPAR Also Washington DC and Baltimore are among the 15 markets in which Xenia had positive RevPAR growth, out of the 31 in which the company has a presence. The others were San Francisco, Santa Clara, San Diego, Philadelphia, Orlando, Atlanta, Honolulu and Dallas. A Hire from JBG Cos. Another reason to think that Xenia remains interested in the DC market is its recent hire of JBG Cos.’ Tom Brennan, who was previously SVP of Asset Management with the local company. He has joined Xenia as senior vice president of Asset Management, with direct responsibility for leadership of the company’s core asset management team. Granted, that sounds like a national platform position, but with JBG’s deep knowledge of the local market it is fair to assume that Xenia may be tapping Brennan for some of that insight as well.

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