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Marriott London Grosvenor Square Hotel

Strategic Hotels & Resorts sells Marriott London Grosvenor Square Hotel to PE firm

Strategic Hotels & Resorts has closed on the sale of the Marriott London Grosvenor Square hotel and the acquisition of the remaining 50 per cent ownership interest in the Fairmont Scottsdale Princess.

Combined with the previously completed sale of the Four Seasons Punta Mita resort, the company executed over USD715m in transactions in the first quarter of 2014.
The company closed on the sale of the 237-room Marriott London Grosvenor Square hotel for GBP125.15m (USD207.7m), or approximately GBP528,000 per key (USD877,000). Net proceeds from the transaction total approximately GBP58.1m (USD96.5m), after the repayment of property-level net debt of GBP67.0m (USD111.3m). The hotel was sold to an affiliate of Hong Kong based private equity firm Joint Treasure and remains subject to a ground lease with 43 years remaining on the term. The company was advised by JLL on the sale of the hotel.
“By closing on the sale of the Marriott London Grosvenor Square, we are finalising our exit of the European market, as previously committed,” says Raymond L “ Rip” Gellein, chairman and chief executive officer of Strategic Hotels & Resorts. “In addition, this sale will eliminate approximately USD1.0m of annual frictional costs associated with the asset and allow us to redeploy capital into one of the highest growth assets in our portfolio.”
Strategic also closed on the acquisition of the remaining 50 percent ownership interest in the 649-room Fairmont Scottsdale Princess resort for approximately USD90.6m. Prior to the transaction, the company owned a 50 per cent ownership position in the asset through a joint venture with an affiliate of Walton Street Capital. The transaction values the asset at a gross value of USD307.5m and includes the assumption of the existing USD117.0m mortgage financing. As part of the transaction, the company earned a promoted interest that was negotiated during the 2011 restructuring of the asset totalling USD19.3m, resulting in a net purchase price of approximately USD288m.
“The Fairmont Scottsdale Princess is one of our highest growth assets as the resort continues to benefit from the addition of 60,000 square feet of new meeting space as well as improving market trends in the greater Phoenix/Scottsdale market. In fact, since the introduction of new meeting spaces and other amenities, group RevPAR penetration at the resort has increased nearly 17 points,” says Gellein. “We are pleased to essentially match-fund this acquisition with the proceeds from the sale of the Marriott London Grosvenor Square, allowing us to execute this acquisition without requiring us to raise external capital. On a full-year basis, the two transactions are essentially neutral to our earnings per share and marginally deleverage the balance sheet. Our nearly three year partnership with Walton Street, who assisted us in recapitalising the resort in 2011, has been both a rewarding and profitable experience, and we appreciate their support and partnership.”
The net purchase represents a USD444,000 per key valuation, a 12.7 times multiple on forecasted 2014 EBITDA and a 6.5 per cent capitalisation rate on forecasted 2014 NOI. In 2013, RevPAR grew 15 per cent at the property resulting in 48 per cent EBITDA growth.

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