Xenia Hotels & Resorts Inc. has sold the 228-room Residence Inn Denver City Center in Denver, CO for a price of $92 million, or approximately $404,000 per key. The sale price represents a 12.8x multiple and a 7.1% capitalization rate on the hotel’s trailing 12-month Hotel EBITDA and net operating income as of November 30, 2018, respectively. The company realized an unlevered IRR of 10.4% on this investment since acquiring the hotel for $80 million in 2013.
“We are pleased to have completed the sale of Residence Inn Denver City Center at an attractive valuation,” commented Marcel Verbaas, Xenia’s Chairman and Chief Executive Officer. “While we view Denver as a core market for the Company, our recent acquisition of The Ritz-Carlton allowed us to further reduce our select-service holdings through the sale of this hotel. We are excited to be able to maintain our exposure in a strong and dynamic lodging market through the ownership of The Ritz-Carlton, a true luxury asset, and our recently renovated Hotel Monaco, a high-quality upper upscale lifestyle hotel, both of which are closely aligned with our long-term investment strategy.”
After the completion of this transaction, Xenia’s portfolio consists of 40 wholly-owned hotels or resorts, including 12 luxury hotels or resorts, representing 26% of the Company’s total room count, 27 upper upscale hotels or resorts, representing 72% of total room count, and one upscale extended-stay hotel. During 2018, Xenia has completed almost $800 million of transactions, consisting of four property acquisitions totaling $361 million, three dispositions totaling $420 million, and the acquisition of its prior partner’s interest in both Grand Bohemian Charleston and Grand Bohemian Mountain Brook, for a combined price of approximately $12 million.
“We have been able to successfully continue our portfolio evolution and improvement through the transactions we have completed this year,” said Verbaas. “With the acquisitions of The Ritz-Carlton, Denver, Fairmont Pittsburgh, Park Hyatt Aviara Resort, Golf Club & Spa, and Waldorf Astoria Atlanta Buckhead, we have added four unique and outstanding luxury assets which we have balanced through the sale of Aston Waikiki Beach Hotel, Hilton Garden Inn Washington D.C. Downtown and now Residence Inn Denver City Center. These portfolio changes have improved the average quality of our portfolio today and enhance the growth opportunities for the Company, as it relates to both revenue and profitability, in the years ahead.”
The sale of Residence Inn Denver City Center has further improved the leverage profile of the company, according to a prepared statement. Pro forma for the transaction, net debt to EBITDA, as defined by the company’s unsecured credit facility, is estimated to be 3.8x, in comparison to 4.2x at the beginning of 2018.
Proceeds from the sale will be utilized for general corporate purposes which may include debt repayments, potential acquisitions consistent with the company’s long-term strategy, and share repurchases under the company’s existing authorization.