Sunstone Hotel Investors Inc. has entered into a definitive agreement with an affiliate of Hyatt Hotels Corporation to acquire the fee-simple interest in the 630-room Hyatt Regency San Antonio Riverwalk.
Sunstone is acquiring the hotel for a gross purchase price of $230 million. Hyatt will continue to manage the hotel under the Hyatt Regency brand and will contribute approximately $8 million of key money as part of the transaction, subject to the terms of the company’s management agreement with Hyatt.
The hotel is located directly between San Antonio’s Riverwalk and the Alamo, the two most visited tourist sites in Texas. The acquisition includes nearly two acres of riverfront land and a 516-space parking garage, located adjacent to the Alamo Visitor Center and Museum, which is currently under development.
It recently underwent a comprehensive $37-million guestroom renovation and does not have any meaningful required near-term capital needs.
Inclusive of the incentives offered by Hyatt, the net purchase price implies a value of approximately$352,000 per key and represents an 11.1x multiple on the midpoint of the company’s estimate of 2024 hotel EBITDA and an 8% capitalization rate based on the midpoint of projected hotel net operating income. The acquisition will be funded from cash on hand using a portion of the sale proceeds from the previously completed disposition of Boston Park Plaza.
The company currently expects to close the acquisition in late April and that the hotel will contribute $12 million to $13 million of hotel EBITDA and approximately $0.06 of adjusted FFO per diluted share during the company’s ownership period in 2024. The company will provide additional details on the transaction, including the impact on its previously provided full-year outlook as part of its first quarter earnings call in early May.
“We are excited to announce our planned acquisition of Hyatt Regency San Antonio Riverwalk, which demonstrates our ability to accretively recycle capital following our disposition activity late last year,” said Bryan Giglia, CEO, Sunstone. “This is the best-located hotel in the city, situated in the heart of the Riverwalk, at the front door of the Alamo, and steps away from the convention center. Our premier location allows the hotel to benefit from an attractive combination of group and transient demand in a market that continues to experience positive demographic shifts, increasing hotel demand, and a business-friendly backdrop. The hotel has been recently renovated and is in great shape with minimal near-term capital needs but has opportunities to drive additional earnings over the long term.”
He continued, “The acquisition of Hyatt Regency San Antonio Riverwalk allows us to redeploy capital at a higher long-term return and is a great example of the value we can create through our investment lifecycle approach. The addition of this hotel, combined with our two recently launched brand conversions and the completion of our transformative investment later this year at Andaz Miami Beach, will position Sunstone for significant earnings growth as we move into 2025. We also retain additional liquidity and balance sheet capacity that we can use to thoughtfully grow our portfolio and drive incremental earnings, superior returns, and greater per-share NAV growth.”
