Affiliates of Hyatt Hotels Corporation (H - Free Report) have entered into an agreement with RLJ Lodging Trust (RLJ - Free Report) as per which Hyatt will sell a portfolio of 10 hotels to RLJ. Subject to customary approvals, the transaction is expected to be completed in Mar 2014.
RLJ Lodging is a publicly traded real estate investment trust. Post transaction, the trust’s portfolio will include Hyatt, Hyatt Place and Hyatt House hotels comprising a total of 1,560 rooms. The Hyatt portfolio will take the total count of RLJ Lodging properties to 160 and also contribute to its EBITDA. The acquisition of these hotels will allow RLJ Lodging to expand its presence in the West Coast region, where these hotels are mainly located.
The asset sale forms a part of Hyatt Hotels’ asset light strategy for greater financial flexibility and helps it to grow through management and licensing arrangements instead of direct ownership of real estate. A higher concentration of management and franchise fees reduces earnings volatility and provides a more stable growth profile.
Over the next two years, RLJ Lodging is expected to make capital expenditures worth $25.0 million across the Hyatt Portfolio. This will allow Hyatt to make the most of asset recycling while maintaining its long-term presence in key markets.
Another hotelier Starwood Hotels & Resorts Worldwide Inc. has also benefited from a similar asset sale strategy. Recently, the company sold its St. Regis Bal Harbour Resort in Miami, Fla. for $213.0 million to Al Rayyan Tourism Investment Company.
Hyatt Hotels presently has a Zacks Rank #2 (Buy). Another hotelier Choice Hotels International Inc. (CHH - Free Report) also looks attractive at current levels with a Zacks Rank #2.