With business down at Park Hotels & Resorts’ core big-box, group-driven hotels, executives are in “active discussions” to sell some assets.
TYSONS, Virginia—Park Hotels & Resorts CEO Thomas Baltimore Jr. said his company is in “active discussions” on selling hotels, and despite there being “a tremendous amount of capital sitting on the sidelines,” the bid-ask spread remains too wide to consummate deals for the time being.
Speaking during Park’s third-quarter earnings call with analysts, Baltimore said the company will look to use asset sales to reduce debt, and he remains “cautiously optimistic” executives will be able to consummate some deals in the coming months.
Baltimore said that appears to be the most logical way to raise capital in the near term.
“We do not at this point see the need for any operating partners, and we certainly do not see the need for a dilutive equity offering at this time,” he said.
As for what assets might be on the block, Baltimore said the top 30 hotels currently account for 90% of the value for Park’s portfolio and “compare well” with the top 40 assets for Host Hotels & Resorts, so they are now effectively viewed as Park’s core assets.
Asked once again by an analyst whether the prolonged downturn and the associated shift in demand to favor leisure transient outside of the U.S. top 25 markets is spurring a change in strategy for the real estate investment trust, Baltimore noted Park continues to be committed to big-box hotels in large markets.
“Part of the answer is based on our strong belief that urban centers are still going to be a very attractive investment thesis,” he said.
He praised San Francisco as a market with continued long-term growth prospects despite near-term issues, which is keeping some properties closed.
“We’re going to be thoughtful about how and when we reopen, and we believe in San Francisco over the long term,” Baltimore said. “No doubt it’s one of the greatest cities in the country. It will recover. We will get to the other side of this. But we think in the near term, it’s really important to be prudent and disciplined.”
The company saw an 86.1% year-over-year decline in revenue per available room to $26.14, which officials pointed to as an incremental improvement from the 95.9% drop seen in the second quarter, according to Park’s quarterly earnings release.
The company’s 33 consolidated hotels open during the quarter saw a 36.4% occupancy rate. The company ended the quarter with 48 of 60 hotels open.
Park posted a net loss for the quarter of $276 million, with adjusted earnings before interest, taxes, depreciation and amortization of -$89 million.
The company also announced some financial moves in the quarter, including increasing its revolver by $75 million while extending its maturity dates two years, amending credit facilities to get “additional financial covenant relief” and reaching agreements to defer interest and principal payments on mortgages for three to six months.
As of press time, Park’s stock was trading at $10.32 a share, down 60.1% year to date. The New York Stock Exchange Composite was down 5% for the same period.
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