Park continues asset sales ahead of Chesapeake deal
Park continues asset sales ahead of Chesapeake deal
02 AUGUST 2019 9:01 AM

Park Hotels & Resorts President and CEO Tom Baltimore Jr. noted both his company and Chesapeake Lodging Trust are selling off properties as the two companies approach the expected September close of their $2.7-billion deal.

MCLEAN, Virginia—Park Hotels & Resorts President and CEO Tom Baltimore Jr. said even though his company is investing a total of $2.7 billion in combined consideration to acquire Chesapeake Lodging Trust, they remain committed to keeping low leverage.

To that end, the sale of three non-core assets for $166 million will be used to pay down debt, Baltimore noted on the company’s second-quarter earnings call, and Chesapeake’s planned sale of two New York properties will help accomplish the same goal.

“We’ll continue to explore non-core asset sales,” he said, and expects to immediately start marketing two or three Chesapeake assets if that deal closes as expected in September.

The pending deal to purchase Chesapeake was announced in early May and is comprised of $11 in cash and 0.628 shares of Park common stock for each Chesapeake share for a total consideration of $31 a share.

The Chesapeake shareholder vote on the deal is slated for 10 September.

He noted asset managers from Park have toured the entirety of Chesapeake’s portfolio and have identified “upside in both revenue generation and additional expense savings.” He would not go into further detail on those opportunities when asked by analysts citing the fact Chesapeake is still an independent company before official closing.

In June, Park announced the sale of a set of three non-core properties—the 507-room Hilton Atlanta Airport, the 274-room Embassy Suites Parsippany and the 317-room Hilton New Orleans Airport—for $166 million.

In July, the company announced an agreement to sell its joint venture interest in the Conrad Dublin. The property sold for a total gross sales price of $130 million with Park’s share coming in at $62 million.

Baltimore noted his company has sold 18 properties for a total consideration of roughly $750 million since spinning off from Hilton.

Chesapeake has announced plans to sell two New York properties—the 122-room Hyatt Herald Square New York and the 185-room Hyatt Place New York Midtown South—for a combined price of $138 million. That deal is expected to close prior to Park’s acquisition, Baltimore said.

Q2 performance
Park’s comparable revenue per available room grew 0.8% to $191.72 year over year in the second quarter, with net income of $84 million and adjusted earnings before interest, taxes, depreciation and amortization of $207 million, according to a company earnings release.

Baltimore said even with just mild RevPAR growth, his company was successful in capturing market share in the quarter. RevPAR index was up 350 basis points in aggregate.

As of press time, Park stock was trading at $25.50 a share, down 1.2% year to date. The Baird/STR Hotel Stock Index was up 16.1% for the same period.

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