Yahoo Finance Host Hotels (HST) to Acquire Turtle Bay Resort in Hawaii
Host Hotels & Resorts HST recently announced that it has entered into an agreement to acquire the fee simple interest in Turtle Bay Resort on the North Shore of Oahu, HI, for approximately $680 million, net of key money. The transaction, subject to customary closing conditions, is expected to close in late July 2024.
The acquisition includes a 49-acre oceanfront land parcel entitled for development. This land parcel is approved for development. Similar to the company’s strategy at other properties, Host Hotels aims to increase its value in the long run.
Subject to final appraisal, the purchase price allocation is expected to be $630 million for the resort and $50 million for the land parcel. The purchase price represents a 16.3x EBITDA multiple or a cap rate of approximately 5.3% on the resort’s 2024 anticipated results.
The resort is located on 1,180 acres on the North Shore of Oahu, boasting five miles of beach and stunning coastline views. It has 450 rooms, including 42 bungalows with direct beach access, a separate check-in and a private pool.
The resort, which was closed from March 2020 to June 2021, benefited from a transformative renovation. The renovation includes guestrooms and bungalows, a lobby, pools, restaurants, retail spaces, meeting spaces, a spa, a new club lounge, building systems and an updated exterior and arrival experience.
The resort is expected to be managed by Marriott under The Ritz-Carlton brand post-acquisition. On the rebranding front, Marriott provided key money and favorable modifications to several existing management agreements.
Prior to considering the substantial growth that is expected from the Ritz-Carlton branding, the resort is projected to become one of Host Hotels' top assets based on anticipated results for 2024. Forecasts show an expected RevPAR of $570, a total RevPAR of $980, and an EBITDA per key of $86,000. Following the recent renovation and rebranding efforts, the company projects the resort to stabilize between 10-12x EBITDA within 2027-2029.
Per James F. Risoleo, president and CEO, “Oahu is a high-demand leisure destination with consistently high occupancy, an internationally diverse demand base, and high barriers to entry, resulting in slightly negative supply growth historically and essentially no anticipated near-term supply. In addition, because of the Resort’s recent transformational renovation, we do not expect meaningful capital expenditures in the near term. With the planned Ritz-Carlton rebranding, we believe the Resort will generate outsized growth as it stabilizes, further elevating the EBITDA growth profile of our portfolio.”
HST has broadened its acquisition focus to include urban markets beyond the top 25 in search of higher portfolio earnings before interest, taxes, depreciation and amortization (EBITDA) and revenues.
On May 1, 2024, Host Hotels acquired the fee simple interest in a two-hotel complex, namely, 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown, for nearly $530 million in cash.
Per the company’s May 2024 Investor Presentation, from 2021 through May 1, 2024, total acquisitions during this period amounted to $2.40 billion, which is 13 times the EBITDA multiple. Such efforts pave the way to capitalize on long-term growth opportunities.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 0.3% against the industry’s downside of 5.9%.
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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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