Park Hotels and Resorts Inc. (PK) has agreed to sell two hotels for a gross consideration of $149 million or about $360,000 per key. The company acquired these two properties, located in San Diego, Ca. and Washington, D.C., in 2019, through its merger with Chesapeake Lodging Trust.
Park Hotels & Resorts Inc. is one of the largest publicly-traded lodging real estate investment trusts (REIT). It expects to use the proceeds from these two sales, which should close in the next 45-60 days, to reduce its leverage.
Excluding capital expenditures, the transaction represents a 7.4% capitalization rate over net operating income for 2019. Since its spinoff from Hilton in 2017, Park Hotels has sold or disposed of 27 properties. These transactions have generated gross proceeds of about $1.4 billion for the company.
Park Hotels and Resorts Chairman and CEO Thomas J. Baltimore Jr., said, “The sale of these two hotels represents our on-going commitment to reduce net leverage and better position our portfolio for long-term, sustainable growth.” (See Park Hotels stock analysis on TipRanks)
Baltimore added, “Year to date, we have announced a total of $173 million of asset sales and are confident about achieving our targeted goal of $300 million to $400 million of asset sales in 2021.”
On May 10, Deutsche Bank analyst Chris Woronka reiterated a Hold rating on the stock but raised the price target to $23 from $22.
Woronka commented, “While PK’s portfolio has one key relative advantage in the form of outsized exposure to Hawaii (which it is difficult not to be bullish on, longer-term), it too has its share of big-box urban hotels that may take longer to fully recover on both the top and bottom lines.”
Based on 3 Buys, 4 Holds and 1 Sell, consensus on the Street is that Park Hotels is a Moderate Buy. The average analyst price target of $23.14 implies 3.5% upside potential. Shares have gained about 173.8% over the past year.
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